Venture capital is like high-risk poker: Michael Moritz

Interview with chairman, Sequoia Capital

During the 2008 financial crisis, Sequoia Capital coined a phrase that neatly encapsulated the pain felt by its fellow venture capitalists and technology companies: "RIP Good Times". Michael Moritz, the firm's chairman and a British honorary knight, has been mulling over new ways to describe what's happening now. Having spent time close to generations of Silicon Valley's brightest stars, Moritz has a thought or two on the subject.

You boiled down the traits of a distinctive leader to just two. One is obsession and two, a capacity for dealing with people. Is that it?

There's a fair amount more, but if you think about (at least in Silicon Valley terms) the people who have been very successful at building technology companies - today you might look at Jeff Bezos or Larry Page or Mark Zuckerberg - are obsessed with the products they want to build and then their companies. I think the very successful people are great at building teams around them and dealing with people.

You are well known for your time chronicling the early days of Apple, and you spent time with Jobs. What did you learn about what makes a good leader and a bad one?

The thing that Jobs has in common with Sir Alex Ferguson is the pursuit of perfection. But for Jobs, the product was never good enough, whether it was a computer, a phone or a tablet. So he was always thinking about the next thing.

I want to talk to you about some up-and-coming leaders in technology: Brian Chesky - your company is an investor in Airbnb-and Travis Kalanick at Uber. What do you see in Chesky, for example?

Chesky exemplifies the wonderful traits of a leader. He's obsessed with his company. With him, there's always another hill and mountain to climb. He pushes his team very hard. He's always trying to stretch them. He's always trying to persuade them to the impossible.

What about Kalanick?

Kalanick is somebody I don't pretend to know.

He's so controversial.

Yeah, well, have you met anyone who isn't controversial who has done really interesting things?

If the headline of Seqouia's slide deck was "RIP Good Times" during the financial crisis, what would the headline be today?

'Gravity Hasn't Been Repealed."

What do you mean by that?

That things eventually will fall down to earth if they're not properly constructed.

So how do you see this playing out? Does this bubble burst, or is there a soft landing?

To me, it's a more rational time than 1999, because I don't think there's a sort of universal feeling that every company is going to be a massive success. People are more discriminating.

How protected are late-stage investments in this environment?

Many late-stage investments aren't really investments. They're just disguised forms of debt. Many of them are well-protected because of the terms that many investors have put around them - the ratchets, the liquidation preferences.

But is that a dangerous trend-these ratchets and the guarantee that investors will get a certain amount back?

If the company doesn't perform, yes. It's high-risk poker.