Sequoia’s Alfred Lin on the art and math of spotting outliers

Within five minutes of sitting down, he and I are talking about exploring conflicting ideas simultaneously. It’s a framework that F. Scott Fitzgerald famously wrote about in 1936: “The test of first-rate intelligence is the ability to hold two opposing ideas in the mind at the same time and still retain the ability to function.

And Lin, who celebrated his 14th year at Sequoia Capital, believes there are practical reasons to consider extremes.

“The thing about keeping things in tension, in high tension, is that the right answer is almost certainly somewhere in the middle,” Lin said. “Even if it leans one way or the other, whatever you’re trying to do, your answer is probably somewhere in the middle.” But if you start in the middle and radiate out from there, you think “oh, this is obvious, it makes sense.” Then you limit the number of solutions you look at. If you look at the extremes and work toward the middle, you’ll cover almost every possibility. Therefore, it tends to bring more options when people keep things in suspense.

Lin has a unique reputation in Silicon Valley. He is one of the most successful investors at one of the most respected VC firms in technology. He has been Sequoia’s lead investor in DoorDash, Airbnb, Citadel Securities and Reddit. The last time Lin talked a lot Fate was 2021, when both DoorDash and Airbnb went public within days of each other. Another idea to keep things exciting—Lin also led Sequoia’s investment in FTX, a crash that sent shockwaves through crypto and technology. (Lin said last year that the company had been misled.) Nevertheless, Lin is still widely regarded as the best of the best, an incredible distinction in the long-game business.

Sitting across from Lin, in Sequoia’s San Francisco space above a chocolate factory, he sounds like the mathematician he almost was. Lin TA-ed statistics courses in elementary and high school, and he noticed that the more advanced the math became, the more concerned it was with extremes. Lin may have dropped out of the Stanford Ph.D. to join LinkExchange (which was sold to Microsoft for $265 million in 1998) but, in his own way, he still does some teaching: Last week, at Sequoia’s pre-seed and seed company-building program Arc, he taught a session on outliers .

What is an outlier? Can you know when you meet one? Lin sees spotting outlying founders as an endeavor both mathematical and human, broad and deeply individual.

“The wrong way to think about math is that it’s just numbers or just abstract,” he said. “But when you study math, it’s more about patterns, seeing insights that no one else has seen before…And I try to see that in people. We often talk about twists and turns. In statistical terms, an outlier is four standard deviations from the mean, and it could be in a positive or negative direction. They are both deviant…But there is also a difference between deviant and deviant. Is this a real signal versus just noise? If someone’s top is super competitive in weightlifting, is that a complete turn off? You have to separate it. I try to find out why someone is different. I think most founders want to talk about how they are similar to all other founders.”

Part of the key point seems to be that someone’s peripheral feature, whatever it is, is somehow uniquely suited to solving the problem they want to solve. Lin is well aware that this is not easy to spot.

“It’s hard to describe what an outlier is,” he said. “But the person has to have a top, and that top has to be in a direction that makes sense for the market they want to go after.”

Lin seems wary of oversimplifying people, as a general rule, and is deeply attuned to the lines between past and present. The way I see it, he works with a mathematical framework, using that framework as a jumping off point to delve into the stories and businesses of individual founders. (Again, two opposing ideas at once.) So, Lin has filters – and then he goes from there.

“In a seed, we’re looking for three things,” he said Fate. “We are looking for an exceptional team, authentic and compelling insights and positive marketing dynamics.”

There are also general traits that startup-ready expats are likely to have, he says. These range from adaptability to work ethic to the ability to attract followers. Lin is a believer in “founder-market fit,” the idea that there needs to be a fit between the founder and the market opportunity they’re pursuing. He’s certainly interested in the vision and wants to see how that vision is connected to reality and implemented – but Lin believes that starting a business is a team sport.

“I don’t think everyone can do all three, but when you put together a founding team, they can do all three,” Lin said. “If you look at Airbnb, today, it looks like Brian Chesky. But let’s not forget that Brian will tell everyone it was Joe’s idea. It wasn’t his idea, so without Joe it never would have happened. And without Nate, this technology would never have been built.”

Lin is very open, but he is hesitant to be dictated to. There is one final contradiction to hold in tension. He both wants to help would-be founders, but doesn’t want to give them (or me) too much information, lest he encourage imitation. When I asked Lin what his best first meeting with a founder was like, he smiled but didn’t answer me directly.

“If I tell you and you publish it, and then everyone tries to be it,” Lin said, “then my screening process will fall flat on its face.

Elsewhere…Fortune’s Most Powerful Women Asia list was recently unveiled and my colleague Nicholas Gordon interviewed Singaporean VC Jenny Lee, an investor in Alibaba, Didi and Xiaomi. Here’s what she had to say about strategy, geography and more.

see you tomorrow,

Allie Garfinkle
Twitter: @agarfinks
Email address: alexandra.garfinkle@fortune.com
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Nina Ajemian handled the offer section of today’s newsletter.

BICYCLE OFFER

– Q-CTRLSydney-based quantum infrastructure software developer, raised $59 million in Series B-2 funding. GP Bullhound led the traffic and was joined Alpha Edison, Lockheed Martin Ventures, NTT Financeexisting investors Alumni Ventures, Salesforce Ventures, John Ealesand others.

– Purpose GreenBerlin-based decarbonization solutions for the construction sector, raised $15 million in seed funding. Fifth wall led the traffic and was joined Atlantic Labs and Speedinvest.

– Lithosa Boston-based developer of electrochemical lithium extraction technology, raised $10 million in seed funding. Clean Energy Ventures led the traffic and was joined TechEnergy Ventures, GS future, Lowercarbon Capitaland MassCEC.

– Radar constructionMunich-based workflow automation software platform for sales in the construction industry, raised $7.2 million in funding. Capital Partners led the round and enlisted existing investors.

– SongZurich-based full-stack distributed tools developer, raised $6 million in seed funding. 1x led the traffic and was joined Fabric Ventures, Arrington capital, Stake Capital Group, IOBCand angel investors.

– Loot Labsa Seattle-based developer of digital collectibles, raised $6 million in seed funding. BITKRAFT Ventures led the traffic and was joined Sfermion, Fabric Venturesand Each state.

– Quarta Stockholm-based qualitative market research software and data provider for finance and investor relations professionals, raised $6 million in funding from Altos Ventures.

– ReviewParis-based social learning app for GenZ and GenAlpha, raised $6 million in seed funding. Speedinvest and Moon fire lead the traffic and get involved Motier Ventures, Station F, Illka ​​Paananenand others.

PRIVATE MONEY

– Butterfly Equity agreed to acquire The Duckhorn Museumluxury wine company based in Saint Helena, California for approximately $2 billion.

– GSE worldwidesupported by a loan arm BC Partnersacquire Marketing netChevy Chase, Md.-based sports, culinary and entertainment marketing company. Financial terms were not disclosed.

– Oakley Capital acquired a majority in Guaranteed data protectionLeeds, England-based data backup, business continuity, disaster recovery and threat intelligence managed services provider. Financial terms were not disclosed.

– Renovus Capital Partners acquired a majority in Angeion Groupa Philadelphia class action solutions provider. Financial terms were not disclosed.

– VSS Capital Partners acquired a majority in Treya partnersSan Francisco-based procurement value creation, strategic sourcing and advisory services for spend management, operations consulting firm for private equity backed clients. Financial terms were not disclosed.

OUT

– Blue Owl Capital agreed to acquire IPI partnersdigital infrastructure fund manager in Chicago, from ICONIQ capital and Iron Point Partners for about one billion dollars.

ANOTHER

– Apollo Global Management agreed to acquire Barnes GroupBristol, Conn.-based engineering products, a differentiated industrial technology and solutions provider, for $3.6 billion.

IPOS

– Upstream BioA Waltham, Mass.-based biotech company focused on respiratory diseases plans to raise $212.5 million in an initial public offering of 12.5 million shares priced between $15 and $17 on the Nasdaq. The company posted $2 million in revenue for the year ending June 30, 2024. OrbiMed, AI Upstream, Altshuler Shaham Provident Fund and Pension, Decheng Capital Global Life Sciences Fund, TCG Crossover Fund, HBM Healthcare Investments, Maruho Germany, Enavate science, Samsara BioCapital, The Omega Fund, The BCLS Fundand Venrock Healthcare Capital Partners back the company.

– Cerebelluma Sunnyvale, Calif.-based neurological medical technology company plans to raise $107.2 million in an IPO of 6.7 million shares priced between $14 and $16 on the Nasdaq. The company posted $54 million in revenue for the year ending June 30, 2024. The Rise Fund Clearthought, The Global Value Investment Portfolio Management, Longitude Venture Partners IV, ABG WTT-Ceribell, Red Tree Venture Fundand Optimas Capital Partners Fund back the company.

FUNDS + FUNDS

– Shore Capital Partnersa Chicago-based private equity firm, raised $1.9 billion for its first healthcare fund, second business services fund and first search fund focused on lower middle market companies in healthcare, food and beverage, business services, industrials and real estate. sector.