There’s a time-honored disaster administration technique, whereby one says nothing and waits for the outrage to cross. For Sequoia Capital, the technique labored fairly properly this week. Whereas accomplice Shaun Maguire initially weathered criticism over an inflammatory social media submit, that preliminary indignation cooled shortly. Now, some appear to suppose that Maguire’s defiant stance could even be strengthening his place. Enterprise Insider really referred to as it “good for deal flow” — controversy as aggressive benefit.

Sequoia’s calculated gamble carries actual threat, although. One other provocative submit from Maguire that hits the improper nerve, a shift in political winds, or escalating penalties might shortly rework their unflappable accomplice from an asset right into a legal responsibility the agency can not afford to disregard.

A disaster communications skilled who has managed repute disasters for dozens of main manufacturers tells this editor, “Companies like Sequoia are bulletproof till they aren’t.”

What occurred

Sequoia’s hands-off method was put to the take a look at earlier this week when the storied enterprise agency discovered itself within the eye of a storm over Maguire’s feedback about New York Metropolis mayoral candidate Zohran Mamdani. Maguire referred to as him an “Islamist” who “comes from a tradition that lies about every part” in a July 4th tweet on X that has since been considered greater than 5 million occasions. Multiple thousand signatures have poured in since on a petition demanding that Sequoia condemn the remarks, examine Maguire’s conduct, and apologize.

There’s been loads of discuss why Sequoia hasn’t performed this, with many shops noting that Maguire isn’t simply any accomplice. This standing owes partly to his friendship with Stripe co-founder Patrick Collison. In line with experiences, at a 2015 Founders Fund occasion, Maguire — then a Founders Fund-backed entrepreneur — defended Collison throughout an argument with Anduril’s Palmer Luckey about quantum computing, incomes Collison’s friendship. The connection proved priceless when Maguire joined Google Ventures in 2016; he helped safe a $20 million Stripe funding throughout his first week. When Maguire left Google Ventures in 2019, Collison personally advisable him to Sequoia’s companions. (Stripe has been in Sequoia’s portfolio since 2010, with the agency investing more than $500 million over 15 years.)

Maguire additionally led Sequoia’s funding in Bridge, a stablecoin platform that Stripe acquired for $1.1 billion, and is reportedly Sequoia’s hyperlink to Elon Musk, although that is in all probability considerably overstated. Musk and Sequoia’s world chief, Roelof Botha, are each native South Africans and have identified one another for greater than 25 years, courting again to their time collectively on the then-nascent PayPal, the place Botha was recruited personally by Musk.

Regardless of that lengthy relationship, the 2 haven’t all the time seen eye to eye. Botha was extremely essential of Musk’s administration type when Musk was CEO of the merged X.com/PayPal firm, the place Botha was CFO. Botha once told veteran journalist Ebbe Dommisse, “I feel it could have killed the corporate if Elon had stayed on as CEO for six extra months. The errors Elon was making on the time had been amplifying the chance of the enterprise.” However Musk was at odds with just about that whole crew on the time, and people tensions have lengthy since been resolved.

The larger level right here: if you’re managing tens of billions of {dollars} in property and your agency’s repute rests on backing winners like Google, Stripe, and Nvidia, you don’t simply forged apart a rainmaker.

In the meantime, Maguire’s habits suggests he’s not backing down. After issuing a 30-minute video on X final weekend wherein he apologized for offending so many — saying he was making some extent a few political ideology and never one a few faith — he has doubled down with more and more aggressive posts this week. He claimed he has “reverse engineered” his critics’ “command construction” and threatened to “embarrass” anybody who escalates towards him. He added that that is him at “1% throttle” and warned individuals to not “fuck w youngsters of the web.”

The silent remedy

Sequoia has precedent for its method to this case. The agency has traditionally given its companions area to precise themselves publicly, with figures like Doug Leone and Michael Moritz (who left the firm in 2023) representing completely different political views.

However there’s a vital distinction between political variety and incendiary rhetoric and clearly to some, Maguire’s feedback lengthen past partisan politics into territory that alienates each political opponents and potential enterprise companions.

It’s additionally price remembering that even for Sequoia, there’s a shiny line. Michael Goguen, one other, earlier rainmaker with the agency, was promptly shown the door when Sequoia realized of a sexual abuse lawsuit filed towards him. The conditions are hardly comparable; Goguen’s points had been authorized and private, not ideological. On the identical time, Sequoia has proven it isn’t keen to circle the wagons at any price, not if its repute is at stake.

Presumably, a number of elements inform Sequoia’s do-nothing PR technique, together with how shortly individuals, confronted with a continuing flurry of stories, transfer on from a scandal. The agency can also be working in a distinct political panorama proper now within the U.S. Together with Donald Trump’s victory and the rollback of DEI initiatives has come new tolerance for controversial speech. What may need been career-ending at an earlier cut-off date is now weathered extra simply.

Past the shifting political winds, the agency is probably going banking on the truth that whereas founders need companions who match the normal, extra genteel VC mould, they need profitable ones much more. Startups being courted by a number of top-tier corporations may not like or agree with Maguire, however when Sequoia comes calling with its observe document and virtually bottomless pockets, most founders are going to welcome the agency with open arms.

After all, there’s the very actual risk, too, that Sequoia is engaged on a contingency plan. (Sequoia declined to touch upon Maguire’s posts when reached by TechCrunch earlier this week.)

Nonetheless, Sequoia’s silence carries dangers. Not all of the signers have been confirmed, however the petition towards Maguire contains the names of some outstanding Center Jap executives and founders who’ve attested to signing it, they usually characterize the sort of numerous, world expertise pool on which Sequoia’s future relies upon. By not addressing the controversy, Sequoia dangers being seen as tacitly endorsing Maguire’s views.

Put one other approach, although the enterprise capital world has traditionally been remarkably forgiving of controversial figures with distinctive deal stream, the agency is playing with its repute in an more and more related world market the place alienating whole areas and communities carries actual enterprise penalties.

Whether or not that wager pays off will depend upon how lengthy the controversy lingers, how a lot enterprise it really prices Sequoia, and whether or not Maguire can resist the urge to push issues previous Sequoia’s personal tolerance threshold. (He has mentioned he doesn’t submit something that hasn’t been “excrutiatingly thought out.”)

Historical past means that established monetary corporations with robust observe information are inclined to outlive their scandals, even severe ones. When Apollo World Administration’s Leon Black resigned in 2021 over his $158 million funds to Jeffrey Epstein, the agency’s inventory barely moved and shareholders appeared largely unfazed. Apollo simply continued its aggressive deal-making beneath new management.

Equally, Kleiner Perkins survived Ellen Pao’s high-profile gender discrimination lawsuit in 2015. However it took years and primarily an entirely new team for the storied enterprise agency to regain its footing in Silicon Valley’s hierarchy. The lesson right here could also be that whereas controversial companions could be endured, the restoration timelines can differ considerably relying on how corporations deal with the disaster.

For now, the disaster communications skilled, who requested to not be named, has some recommendation for Maguire and, by extension, Sequoia. Concerning the video Maguire printed within the aftermath of his preliminary feedback, the knowledgeable mentioned, “I did suppose that apology addressed the ambiguities in [Maguire’s] submit. However it’s a 30-minute video — you need to be actually to observe this.”

If there’s a subsequent time, the skilled mentioned, Maguire ought to “do two movies — one for 3 minutes” and one other, longer video, for anybody who needs to maintain watching.

Generally, the knowledgeable added, “much less is extra.”


Source link