Sequoia VC Reveals: The One Trait That Built Airbnb, DoorDash & Zappos

KEYPOINTS

• 01

  Life is an infinite game, so focus on inputs and values rather than finish lines.

  Lin was a self-described ‘high variance, high beta’ kid who tried to hack his way out of homework. A sixth-grade teacher, Mrs. Einstein, asked him what he would do ‘when there’s no finish line.’ That stuck. In an infinite game you help set the rules, and the people who do best know their values. His include clear inputs, consistent compounding, directness, and learning something from every person—a lesson from his father.

• 02

  Solve the first-order issue, not the to-do list.

  Long to-do lists hide the item that matters most. At Zappos the slow website wasn’t fixed by cutting photos or search results—both customers wanted—but by solving it with technology through caching. A sluggish distribution center wasn’t a picking or packing problem; it was a flow problem with too many handoffs between batched steps. Stepping back to see the whole flow produced better fixes.

• 03

  Free cash flow equals freedom.

  After LinkExchange, which sold to Microsoft for $265 million on about $15 million of revenue, Lin learned that eyeballs aren’t a business. Sequoia owns shares in the company, not in the founder or product, and Pat Grady’s line is that free cash flow equals freedom: no need to raise, and the ability to fund growth and new products. Company velocity—speed plus direction—only rises if someone keeps pushing, and pushing reveals the obstacles you need to remove.

• 04

  You can’t just be better; you have to be different—and right.

  Lin uses a 2x2 of conventional versus contrarian and right versus wrong; contrarian and right is where outsized returns are. Sequoia passed on DoorDash’s seed round, fearing it was college kids spending parents’ money. But DoorDash’s suburban start was reasoned: suburbanites value delivery more than city dwellers who can walk downstairs, and density exists along main streets like Palo Alto’s University Avenue. Suburban profits then funded the cities, as Walmart avoided competing with Sears and Kmart head-on.

• 05

  Hire for slope, not intercept.

  A LinkExchange marketer who fit every spec but not the values taught Tony Hsieh the difference between mercenaries and missionaries. In a fast-growing company, someone growing slower than the company falls further behind every day. Lin prefers high slope and low intercept, hiring people one or two ‘chapters’ ahead rather than ten, since big-company executives often relied on guardrails startups lack. Track regrettable versus unregrettable turnover, not raw turnover.

• 06

  Your best customers may have the worst-looking metric.

  Zappos’ return rate rose every year and returns were the costliest warehouse process. Comparing best and worst customers showed the highest-LTV customers returned the most, because they also bought and kept the most and tried new things. The first-order fix was not a stingier policy but cheaper return processing. Zappos went from 30 to 90 to 365-day returns as a stake competitors struggled to match.

• 07

  Compounding 1% a day beats chasing 10x ideas.

  Lin wrote 1.01^365 on Zappos whiteboards: a dollar compounded 1% daily becomes about $37–38. Founders who want only 10x ideas miss that steady daily improvement moves the needle more. He paired this with ‘the power of and’—shipping faster and keeping the site fast, rather than either-or tradeoffs.

• 08

  Crucible moments are one-way doors resolved by calm, principles and sequencing.

  In crucible moments, Lin says, you stop, look around 360 degrees, pick a direction and accelerate. Tony Xu notes that everyone knows what to do; sequencing determines whether you’re remembered. Values tell you the order. Lin uses Bezos’s type-one versus type-two test: for irreversible decisions, borrow Chesky’s ‘run out the clock’; for reversible ones, decide fast and iterate.