Q&A with Sequoia Capital's Roelof Botha - TechCentral

Q&A with Sequoia Capital’s Roelof Botha

Roelof Botha

Roelof Botha

There are a couple of South Africans who are making their mark across the world. One of them is Sequoia Capital partner Roelof Botha, who has become something of a Silicon Valley superstar. Forbes recently named this South African as one of the leading venture capital investors in the world.

Botha is not only an investor, but has also held several executive positions at some of the world’s biggest digital undertakings, including PayPal, YouTube, WhatsApp and Instagram.

He grew up in Pretoria and Cape Town and matriculated from Hoërskool Jan van Riebeeck. He then studied actuarial science at the University of Cape Town and obtained his MBA at the University of Stanford in California, and in both cases was named the best student of the specific year.

He is also the grandchild of the retired politician Pik Botha and son of the famous economist Roelof Botha. Moneyweb editor Ryk van Niekerk spoke to Botha from Silicon Valley.

Ryk van Niekerk: How strong are your ties to South Africa, and how often do you visit?

Roelof Botha: I still have strong ties to the country. My whole family still lives in South Africa, except for one of my brothers who moved here. My mother, father, grandparents and everyone else still live in South Africa. I don’t visit often — it’s quite a long way to travel — but I’m planning to visit my family later this year. I also make a point to watch some rugby every weekend — it’s a good way to maintain my connection to the country.

Van Niekerk: Which team do you support?

Botha: Well, I prefer the Blue Bulls because I was born close to its HQ — a kilometre or so from Loftus — and because I grew up in Cape Town, I still have a soft spot for the Stormers. But to be honest, if we play against any of the Australian or New Zealand teams, I support our team — and it doesn’t matter which team it is.

Van Niekerk: Yes, to be born a kilometre from Loftus is a good start. But I want to talk about how you got to Silicon Valley. You’ve made your mark in our country’s academic environment, you were the top matriculant in your year and you also were the best actuarial student during your studies in Cape Town. But when did you decide to find your future in Silicon Valley?

Roelof Botha worked with Elon Musk at PayPal

Roelof Botha worked with Elon Musk at PayPal

Botha: It’s difficult to determine. It has always been my ambition to study abroad. I was lucky to excel in Cape Town, but you’re always curious whether you’d be able to compete overseas. I think there was always something in me that believed it’s possible to study in Europe or America and to measure myself against the best in the world. So, this formed part of the motivation.

During the mid-1990s, when the Internet boomed, I had a feeling that something interesting was about to happen in Silicon Valley. There was something dynamic, people were creating new businesses and were busy changing the world. To be honest, I didn’t think it would be so good. I was lucky. I had a feeling I should come out here, and I got into Stanford, studied here, found myself in this environment, and luck played a big part in my career.

Van Niekerk: Your first job was at PayPal, a company that was later sold for a lot of money, but you went to PayPal almost out of desperation. Tell us how you got involved.

Botha: It’s a funny story. Long-Term Capital Management, the big New York hedge fund, exploded in 1998. During that time, there was also a currency crisis in the developing countries. During August 1998, one month before I left for Stanford, the rand plummeted. I saved up to study at Stanford, and overnight my money lost 30% of its value in terms of dollars. So I didn’t have enough money for my second year of studies. I borrowed money from my friends and family, but I just couldn’t get by. So, I accepted my third offer to join the company, partly because I didn’t have enough money for the following month’s rent.

Van Niekerk: But it’s an unbelievable story. You walked in, and soon became one of their most senior employees. What happened? What did you do right to grow so much in the company in such a short time?

Botha: Luck played a big part. When I got there, the company didn’t have someone to take control of building a business model and to figure out how the company should grow into a big business. PayPal was already an excellent service with a lot of consumers, but it wasn’t a business. I got there and saw that nobody had done the work, and I took the initiative to build a model and to start a conversation with the management team to help them make decisions to turn it into a company.


Roelof Botha has no intention of returning to South Africa from Silicon Valley

That’s the one thing I’m looking for when recruiting people for the companies I’m involved with — is it a person who will wait for instructions, or is it someone who will take initiative, who’ll see a problem and solve it?

Van Niekerk: But you really do have a talent to identify small businesses bound for greater things. WhatsApp, Facebook and PayPal are excellent examples. The Internet’s dynamic is fascinating — you have big giants like Google and YouTube, but most of the Internet companies are also struggling. What is the key to identifying and investing in the right business?

Botha: Keep in mind that we do make a lot of mistakes. There are a lot of companies we should have invested in, but we didn’t spot them and we didn’t see the company’s future in the same way as the company’s founders. And a lot of the companies we did invest in weren’t as successful. I think there is a lot of humiliation in our business because we make a lot of mistakes.

But we do have the ability to share the future with the founders. The most interesting thing about these founders is they all have the potential to see the future before the rest of us. They can see what the world will look like in 2020 or 2025, and they’re busy creating a business to make it a reality. My job is to share their dream, to see whether they’re able to realise this dream in the future and to listen carefully when its founder describes the problem they’re trying to solve and to reason whether it’s a global issue or not.

It might be a very interesting problem, but one that isn’t shared with a hundred million other people, and this is what we need to judge when we look into to a business.

Van Niekerk: The speed of innovation is accelerating at a tremendous pace. We see new technology bound to change our lives on a daily basis. Can you maybe give us a glimpse of how much the world will evolve over the next 20 or 30 years?

Botha: I think you’re absolutely right — the rate of change is accelerating. Therefore, the world will look very different partly due to the exponential curve technology is experiencing as well as its growth. Our brains aren’t developed to grow exponentially. It’s not intuitive for us. If I tell you that in 10 years, a $1 000 computer will have the same power as one human brain, you’ll find it hard to believe. And what if I tell you that in 2045, a $1 000 computer will have the same brain power as all the people in the world? These types of things are hard for us to accept. If I told you 10 years ago self-driving cars would drive around Silicon Valley for hundreds of miles, you wouldn’t have believed me. I wouldn’t have believed it. But it’s just a small glimpse into the pace of change we’ll be seeing.

Van Niekerk: It’s one thing to say it, but at the moment the inventions that changed our lives the most weren’t there 10 years ago. And it won’t be a linear development of existing technologies, so should we brace ourselves for a massive change in our lifestyle and environment in as little as 10 years’ time?

Botha: Yes, I think so. But what scares me the most doesn’t necessarily have anything to do with our business — it’s what we do to the Earth and nature. If you look at history and our changing climate, it can change quite rapidly. Think about the meteorites and their impact on Earth during history. I don’t believe we have an idea how fast the world is changing. I read two weeks ago that 93% of the corals in the Australian Great Barrier Reef are bleached. The pace in which we’re changing our world with its 7bn people, that’s what scares me the most. Some people are worried about things like artificial intelligence, but I don’t think Silicon Valley and its innovations are threatening us. It’s nature that will be a threat to us.

I recently had lunch with Elon Musk, and he’s a very interesting man

Van Niekerk: Speaking of the environment, another South African making his mark in Silicon Valley with the development of green technology is Elon Musk. He was also born in Pretoria. Do you have any contact?

Botha: Not really, because he’s quite busy! [laughs]When I think of all the people I work with, it’s enough of a challenge to manage one technology company, but to manage two on the level he’s managing — I find it hard to comprehend. He has five boys, so there’s also a big family who require his attention. But I do see him from time to time. He recruited me to work at PayPal — I still have the original recruitment letter he signed, and my first desk at the company was right next to his. I recently had lunch with him, and he’s a very interesting man.

Van Niekerk: Let’s talk about Silicon Valley. To visitors, it feels a lot like a different planet, because the people think so differently there. Its innovative thought processes are almost tangible. How do you see Silicon Valley at the moment? How can a South African make it work, like yourself and Elon? Does it really go against expectations, or is it more about the way you think that will allow you to fit in?

Botha: It’s a very open place. And it’s much different from the rest of America. Silicon Valley feels like a foreign destination to a lot of American visitors, even though it’s a local flight that brings them here. It’s a dynamic environment. It’s a metropolis with a lot of immigrants, and this is what makes Silicon Valley so appealing. Around 40% to 50% of the companies we invest in, have at least one foreign co-founder. And it says a lot of those individuals who were able to make it here because they were so focused to come here.

And if you’re here, you think different to the rest. It’s very liberating, you’re not bound to a specific way of thinking. I think there’s an opportunity here for anyone. I haven’t experienced a place like this anywhere else. America’s immigration law makes it difficult to get here, but if you get an opportunity to study here, it’s an easy way into the country and to prove yourself.

I think there’s an opportunity here for anyone. I haven’t experienced a place like this anywhere else

Van Niekerk: You are venture capital investors, and you’ve been named as one of the best venture capital investors in the world. And in Silicon Valley. This means you’re making out cheques to a lot of those enterprises. What are you investing in at the moment?

Botha: A whole variety of things. The way in which we think about business is based on the following: the consumer, the enterprise or business clients and then we do a bit of healthcare. So, we are interested in informatics. Genetics is fascinating, and it’s more an information technology enterprise than a purely biological enterprise. The majority of businesses we’re investing in focus on things like storage, networking and company-focused software. For example, I’m on the board of a company called MongoDB, a database used by a lot of people.

The other half of our portfolio is mostly end-user businesses, like YouTube in which I was involved with or WhatsApp in which we invested. There are also businesses focusing on smaller companies. I’m on the board of a company called Square. It’s a payment service company with over 2m American small businesses as their clients. (Square was founded and is led by Twitter CEO Jack Dorsey.)

Van Niekerk: What was a turning point in your career where you could see how the trajectory of your development started to change?

Botha: There were three key decisions or opportunities. The first was Elon and the other guys at PayPal who saw something in me and took a chance with me even though I didn’t have any work experience in America. This was the first turning point where I got the opportunity to work for a company like that.

The other was during my second year at PayPal. Just before we listed the company, I was given the opportunity to become the chief financial officer of the company. I was 29 years old and the chief financial officer of a billion-dollar public company in America. I don’t think I was ready for it, I had to work hard to earn my turn, but people were willing to take a chance on me and my future.

The third is Michael Moritz, one of the investors at Sequoia [Capital], which initially invested in PayPal, Yahoo and Google. He saw that I might be a good partner at Sequoia Capital, and 13 years ago he gave me the opportunity to join the company.

I always think of these moments when I see young people with talent, and I’m willing to give them a chance as well. I’m trying to give back — I had all these opportunities, and people took a chance with me. There wasn’t proof that I was competent to fill positions, but someone thought I might have a chance to do it. So, I’m trying to do the same for others.

Van Niekerk: Have you given such opportunities to other South Africans?

Botha: Yes, one of the companies of which I’m a board member, Natera, is a bio-informatics company that helps people to have healthy babies. They have a test for women who are nine or 10 weeks pregnant that determines the health of the unborn baby and whether the child has Down syndrome without doing an amniocentesis.

I met the company’s founder, Matthew Rabinowitz, in 1987 at academic holiday school, which is just a nice name for a nerd camp [laughs]. In 1990, he was the top student at what was then the old Transvaal’s final examinations — an absolutely brilliant man. He studied at Stanford, after which he started the company. We invested 10 years ago. The company is listed and it’s a very, very interesting business.

Van Niekerk: Let’s return to South Africa. Lately, the country made the headlines for all the wrong reasons. What is your perspective as an outsider of the current situation in South Africa?

Botha: I’m worried that we’re moving from a democracy to a kleptocracy. The impression I get as someone living abroad is that the government isn’t focused on improving the welfare of the average South African. There are also those individuals at the head of the country who are enriching themselves at the expense of the average person. This makes me very sad.

Van Niekerk: Do you see a future where you’ll return to South Africa?

Botha: No.

Van Niekerk: What are you envisioning for the road ahead? For how long can one handle such a high profile and stressful job? Would you stay within the venture capital industry for the foreseeable future?

Botha: Yes [laughs]. I think the easiest way to grow old is to stop working. I think the whole concept of retirement made sense in a world where the work wasn’t interesting. Just think about an artist or musician: they never retire because they’re doing what they love, it’s their hobby, and they love it. So if you’re lucky to find a job that challenges you and makes you happy, then it doesn’t make sense to retire and do something else. I enjoy what I do.

The kids are keeping South African silkworms as pets

One of the fellows who helped me and mentored me when I started at Sequoia is now 85 years old. He still works every day and he’s as sharp as a knife. At our firm you need to retire at 65, or at least retire from management, because we recognise the importance of handing over the reins to a new generation. This is partly why Sequoia is such an exception in terms of the venture capital industry. We were founded in 1972 — before I was even born — but we’ve handed over the reins to a new generation a couple of times now. So I need to stop managing Sequoia at 65, but I’ll still invest [laughs]. But you never know. It’s 20 years from now, and a lot can happen between then and now.

Van Niekerk: Yes, and Donald Trump might still become president. Are you worried about his influence?

Botha: Yes [laughs]. it’s quite strange to witness it here. I’m not too sure whether he’ll win — I think there’s a lot of people who are worried what he can do to the government. But one should remember that America has a very interesting system — they have congress, the house and the president, and there’s a good balance between these three. Even if he becomes president, I don’t think he’ll have much power. I don’t think there’s a lot he can change. He can veto things, but I do not believe that it can drag the country through the mud.

Van Niekerk: In conclusion, your family — do you live in Silicon Valley and do you engage in interesting things over there?

Botha: I don’t know. Interesting things are almost a “beauty is in the eye of the beholder” – I’m not too sure whether it will be interesting for other people! [laughs]. We live in Silicon Valley, and the kids are keeping South African silkworms as pets, so I’m using my experiences from my childhood to expose them to silkworms and those type of things. We enjoy skiing, and I think we have a lot of fun on the weekends. To be honest, the thing that gives us the most joy is reading. There are many weekends where we’ll read as a family for two to three hours on a Saturday afternoon.

Van Niekerk: Do you still speak Afrikaans at home?

Botha: Well, my wife’s from Singapore. She’s Chinese and English is also her second language, so it’s hard to teach Afrikaans to my children in such an environment. They do know a couple of words, my son is crazy about rugby and the other day he told me about the players he’ll pick for the Springbok team, and I was quite impressed that he pronounced every name correctly! Besides that, I think the only other word they know really well is stoutgat [laughs].

  • This interview was originally published on Moneyweb and is used here with permission

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