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Sequoia Capital’s Roelof Botha predicts success for Elon Musk at Twitter – with insight from the Wall Street Journal
Venture leader says firm conducted due diligence on the deal and he thinks Twitter’s business model can be improved
By Berber Jin
Roelof Botha, the head of Sequoia Capital, said he thinks there are large improvements to be made for Twitter Inc.’s current business and that Elon Musk’s takeover bid for the social-media company will be a success.
Mr. Botha, speaking at The Wall Street Journal’s Tech Live conference, said he thought Twitter could find better ways to make money beyond advertising and improve its product. Sequoia has committed $800 million for the deal. The funding is set to come from Sequoia’s main venture funds, its wealth management business called Heritage, and its crossover fund Sequoia Capital Global Equities.
The two men have had a longstanding relationship: Mr. Musk hired Mr. Botha to join what eventually became PayPal Holdings Inc. about 20 years ago, when the investor first moved to the U.S. from South Africa, where he was born and grew up. Sequoia has also invested in SpaceX and the Boring Co., two startups founded by Mr. Musk.
“Elon has succeeded in many different industries,” Mr. Botha said. “He’s an incredible first-principles thinker.”
Mr. Botha said Sequoia ran financial models and spoke to current and former employees when examining the potential of the Twitter deal. He said he had spoken to Mr. Musk about potential changes to the Twitter business, including around payments integration, and believed that Mr. Musk could address issues around account verification, such as abuse and spam, and introduce new monetization strategies such as using subscriptions.
The approach of some investors in evaluating the deal has drawn significant attention. Marc Andreessen, the co-founder of venture firm Andreessen Horowitz, wrote to Mr. Musk in April that he was willing to commit $250 million for the Twitter deal, with “no additional work required,” according to documents made public in the recent Twitter-Musk lawsuit. Andreessen agreed to ultimately invest $400 million.
Sequoia’s commitment to the deal comes when the fundraising pace for large startups has slowed amid the technology rout. Mr. Botha warned of tough times to come, predicting that a recession was likely and that the current drought in public listings would last for at least a year. In March, Sequoia issued a memo to its founders advising them to cut costs in anticipation of a worsening macroeconomic environment.
Mr. Botha said that escalating geopolitical tensions between the U.S. and China also posed challenges for Sequoia’s relationship with its China arm, which was started in 2005 and has backed some of the country’s biggest companies, including TikTok owner ByteDance Ltd. and e-commerce giant Pinduoduo Inc. Sequoia China has independent decision-making authority and conducts fundraising separately from Sequoia’s U.S. and Europe venture funds, which has stoked speculation that the two entities could eventually be separated completely.
“If we had to, we could separate, but that’s obviously not something we would desire,” Mr. Botha said. “We’ll see what the future holds.”
