Good times are over, not sure when they'll return: Sequoia warns firms

Sequoia took a shot at hedge funds that have been targeting private investments, who are now "tending to wounds in their public portfolios which have been hit hard"

Calling the current environment a “crucible moment,” Sequoia Capital warned that the good times are not only over, there’s no indication when they’ll return. 

In a Zoom call earlier this month with the founders of its approximately 250 portfolio companies, the venture firm reviewed a 50-page presentation titled “Adapting to Endure,” according to documents obtained by Bloomberg News. 

Sequoia laid out the case for a long and drawn-out recession, and instructed founders to “do the cut exercise” immediately if they haven’t already done so by examining ways to conserve cash through eliminating or scaling back projects, R&D, marketing and other expenses.

“It doesn’t mean you have to pull the trigger, but that you are ready to do it in the next 30 days if needed,” Menlo Park, California-based Sequoia wrote in the presentation. The Information earlier reported the presentation.

An increasing number of late stage private tech companies  -- the same ones that were bankrolled by investors to grow at all costs –- are re-focusing on profit. Swedish buy-now-pay-later company Klarna Bank AB and Istanbul-based rapid delivery startups Getir -- both backed by Sequoia -- are among businesses that have laid off hundreds of people recently. 

Sequoia, which also weighed in on the 2020 dip with its Black Swan memo and the RIP Good Times in 2008, called out pre-IPO startups as being particularly vulnerable if they weren’t focused on delivering profits.

On Tuesday, rapid grocery delivery app Gorillas Technologies GmbH announced it was cutting 50% of its global office staff, or around 300 workers. Online health-care provider Kry International AB, valued at $2 billion last year, recently said it would slash 10% of its 1,000-strong workforce.

Sequoia also took a shot at hedge funds that have been targeting private investments, who are now “tending to wounds in their public portfolios which have been hit hard.”

Tiger Global’s flagship hedge fund recently posted a 15% April decline, extending its loss for the year to 44%, fueled by declining tech investments. SoftBank Group Corp. also reported a record annual loss at its giant Vision Fund unit after a selloff in tech shares pummeled the value of its portfolio companies, including public holdings like Coupang Inc., Uber Technologies Inc. and Didi Global Inc. 

Not everyone is so pessimistic about future markets. Andreessen Horowitz said Wednesday that it had raised a $4.5 billion crypto fund, the industry’s largest to date. Palo Alto, California-based TripActions is also in discussions with investors to raise new money at around a $9 billion valuation, according to people familiar with the matter.