Sequoia Capital advises startups to prepare for a strong economic growth

A year after warning startups with its Black Swan memo, venture capital firm Sequoia Capital released a follow-up post advising startups to buckle up for stronger economic growth in the second half of 2021.

The Silicon Valley firm said consumer debt has reduced and savings have increased as the Covid-19 vaccines are attempting to bring lockdown to an end.

In a note to its portfolio company founders which was later reposted on Medium the VC firm said, “While the pandemic is far from over, we see an important window of opportunity opening right now. If you feel confident about your business post-vaccine, now is the time to start carefully stepping on the gas”.

The venture capital firm advised startup founders and chief executives to remain steady and cautious in this unpredictable environment, but also to stay optimistic about where the world is headed. “While you prepare to take advantage of the opportunities ahead, remain nimble as you fine-tune your tactics. This will enable you to focus on your long-term aspirations while navigating the next few quarters” it said.

It also asked startup founders to foresee customer pain points and respond to their changing needs. “No one really knows what the post-vaccine world will look like. Continue to have “Dumbo ears”. There will be just as many surprises coming out of the pandemic as there were going in.” the firm said.

Although the virus outbreak had a severe impact on certain sectors, several technology companies have gained from people shifting much of their activities online due to the pandemic-induced lockdown. While dealmaking reduced during the early days of the pandemic, it saw a significant recovery in the second half of the year.

Economic Times on Thursday reported that average deal sizes across sectors have gone up significantly in the last eight months with funding rounds closing in record time and startups acquiring more capital than planned.

Sequoia Capital emerged as an exceptional venture investor in 2020, with seven of its portfolio firms going public amidst the IPO rush in the US last year. Three of them – Airbnb, DoorDash, and Snowflake – are among the biggest ever technology IPOs in terms of capital raised, with each of them raising more than $3 billion through their respective offerings.

Earlier this month, Economic Times reported that Sequoia India invested in the highest number of startups in the country last year, powered by the shutdown of a $525 million venture fund and a $825 million growth fund.

The venture firm had also registered a big win from the public debut of one of its non-tech bets Indigo Paints in January this year. The firm was expected to acquire up to Rs 650 crore by selling a 7-8% stake in the firm’s IPO, as reported by ET in January.

Sequoia is also an investor in Zomato that is planning to tap the public markets this year, although no investor is selling its shares in this offering.