VC Legend Doug Leone Touts AI, Praises Elon Musk, Reveals Dinner Test

  • Doug Leone compared AI to mobile devices and the internet in terms of technological impact.
  • Great companies often emerge in tough times, and easy money can be bad for founders, he said.
  • The former Sequoia Capital chief explained what he looks for in people, and how he judges them.

World-beating businesses are often born in tough times, easy money spoils company founders, and artificial-intelligence tools like ChatGPT are part of a new technology paradigm, Doug Leone has said.

Leone is a legendary venture capitalist who led Sequoia Capital for over 25 years. He praised Elon Musk’s ambition, revealed the traits and attitudes he looks for in people, and cautioned against becoming a VC just to get rich.

The billionaire investor spoke on a recent episode of the “Invest Like the Best” podcast.

Here are Leone’s 10 best quotes, lightly edited for length and clarity:

1. “Some of the greatest companies got created during times like this, whether it was Cisco, whether it was PayPal and Google, whether it was Stripe and Square. Those companies with terrific DNA got built during very difficult times.”

2. “What we have right now is a bit of a shitshow. There’s companies with $500 million in the bank, $1 billion in the bank, with maybe an $80 million run rate and no growth perspective. They don’t know what to do. Bad habits all over the place. And that’s what happens during ‘wonderful times.’ All these lousy habits are built.”

3. “AI is the next platform shift in the same way that mobile was the one before, internet was the one before. AI is real, but we are going to overestimate it in the short term. We’re going to invest in everything in the same way that in 1999, we invested in everything. But then Google came out of that, and Facebook came out of that.”

4. “Elon Musk is a builder. I’ll probably bring Elon, if he’s serious. We’re not talking about, ‘Should I be CEO of Twitter?’ Elon can discuss scale of ambition.” (Leone was asked to pick three dinner guests to offer guidance to a founder.)

5. “The thing I can’t do is the black magic. Black magic is reserved for founders. Everything else is mere mortal stuff. That’s what we can do. And we’re probably the very best in the world at Sequoia in doing that.”

6. “You lose the founder, you lose the soul of a company. Telling the founders cuts a little bit of the pinky, and you want founders with 10 fingers and 10 toes. But there are certain times where it’s worth a small piece of the pinky to get back in the right direction.” (Leone was discussing how he informs entrepreneurs they’ve made a mistake.)

7. “Mike is a very introspective Brit, strategic. And I am a gregarious Italian. We were very different cats. And we survived and we excelled. We made it up as we went along. We had guts, the like of which you’ve never seen. We were killers. Not killers to make the most money, killers to get the job done.” (Leone was talking about his longtime partner at Sequoia, Michael Moritz.)

8. “In order to get something done in life, you can’t just walk down Main Street and be a sweetie pie.” (Leone said he looks for founders, partners, and employees who are seen by others as insufferable, belligerent, and bad listeners.)

9. “If you really want to understand someone, it probably takes two to three hours, including a dinner when people relax and start showing you things. You want to see how people place orders, and you want to see what things they’re saying: ‘I always like to put salt in my food.’ Well, that tells me you’re hardwired and you’re not open to new ideas. The old classic is how you treat a waiter or a waitress — boy, that really drives me crazy.”

10. “What you shouldn’t do and say: ‘There’s money in venture, I want a cushy life, I want to go into venture.’ That would be the wrong choice, both in 1999 and in 2023.”

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