Seed Fund V: Forging the Future
Announcing Sequoia’s fifth seed fund, and now accepting applications to Arc America Spring ’23.
By Team Sequoia
Published January 18, 2023
Today, we are excited to announce our fifth dedicated seed fund to support the next generation of early-stage founders. The $195M fund enables seed investments across the U.S. and Europe, and also includes investments made in future Arc cohorts. Arc, a catalyst for outlier founders at the pre-seed and seed stage, will expand from two cohorts to three in 2023. With curriculum taught by experienced partners and operators, as well as a tight-knit, curated community, Arc is purpose-built to increase founders’ chances of enduring success. The Arc America spring session will run March 6th to April 19th. Admitted companies will receive $500K-1M in funding at the start of the program. We are now accepting applications through February 5th (11:59PM PT).
Over 50 years, we have experienced every cycle of economic euphoria and economic gloom. While markets gyrate, outlier founders building outlier companies persist. They embrace constraints, unlock creative advantages, make technological leaps and are determined to endure. Airbnb, Block, Stripe and WhatsApp all emerged during the Great Recession. We are confident that the next legends are being formed in this moment and we strive to be their first true believers.
As we launch Seed Fund V, Sequoia partners on the Early team share a few emerging tech themes that have them excited about the decade ahead:
“AI will be the most important theme of the next decade, driven by the scale of data, new technological breakthroughs in generative models and advancements in compute. Github Copilot has proven that we can make even top developers 10x better at what they do; ChatGPT has shown how powerful these products can be and how excited consumers are to use them. Both are just the beginning of interesting applications to come. I’m excited to see how foundation models, and a vibrant ecosystem of applications built around them will fundamentally transform every category we know of today: developer tools and infrastructure, search, the collaboration and productivity suite, games and entertainment, the creative suite, biology… to name just a few.”
“AR will lead a revolution in the physical world. VR will change the way we have an immersive experience at work and play. Potentially the next consumer platform to drive wide-scale innovation, we could enter a world where we work and play through the “lens” of AR/VR glasses. The hardware is getting better and better: brick headsets to portable headsets, and lightweight glasses will be coming soon. One day, those glasses will be replaced with daily contacts. Imagine having all of the power of your smartphone piped through your eyes constantly. Imagine combining that power with AI algorithms to surface relevant information, suggest creative ideas and options, improve your every decision, and make your life more fulfilled, fun and entertaining.”
“Enterprise AI and the data stack are promising areas for the next decade, because the virtuous data cycle is the new network effect and the sky’s the limit. The proliferation of AI into everyday office software has the potential to create a new kind of hybrid workforce that will increase individual productivity and enable leaner teams to do more. I’m also excited about enterprise fintech, because empowering the flow of money empowers commerce and progress.”
“Given the recent bans on new combustion-engine sales in Europe starting in 2035 (and US states following suit) and energy prices rising at the fastest rate in 30-40 years, electrification has become a magnet theme for talent. With the global ambition to reach net zero carbon emissions by 2050, power consumption is projected to triple over the next 30 years as formerly gas-powered appliances plug into the grid and living standards rise. Electrification is one of the first decarbonization levers, being the lowest-cost and easiest to implement in most sectors. We are seeing disruption at each point in this value chain, from generation (solar, batteries), to distribution (virtual power plants) and consumption (the connected home).”
“Data is becoming the lifeblood of not only decision making through analytics but also now how products and applications work around us. The products we use will be transformed by data and the new AI models that are more advanced and accessible than ever before. Both the data infrastructure and the product layers surrounding this change are ripe for new companies to be created. Outside of the world of data and bits, I’m also excited about the huge number of talented people who are looking at the world through a climate-focused lens and solving the looming climate challenges ahead of us. Many of these businesses are incredibly hard, require moving a lot of atoms, but the market size and potential to transform the way we live is enormous.”
“I’m excited for new developments in consumer social and self-expression. Social media has taken us a long way, but it is time to continue evolving how we interact, express ourselves, and build relationships. Two major changes are occurring: 1) People are seeking authenticity, meaningful connections and a sense of belonging in a post-pandemic world of increased loneliness and polarization. 2) AI has the potential to revolutionize content creation and self-expression—and creation tools are at the core of all consumer social. What’s next in a world where AI can generate a video you’d never be able to film yourself? Where you can livestream as an avatar that looks nothing like you, but frees you to be your real self? What would it be like to enter a chatroom filled with both NPCs and real people? The best founders will tap into our basic need for connection while pushing boundaries and avoiding the uncanny valley.”
“Generative AI will transform all engineering workflows and the entire toolchain: from the IDE, to debugging, to CI/CD. Microservices have emerged as the predominant new application architecture. Every new platform solves some old problems but creates new ones: many microservices problems wait to be tackled, such as securing service to service communication. On the security side, identity and access control and automation are the biggest pains for many CISOs. Reasoning who should have access to what applications and resources, and what level of access is a gnarly problem in search of good solutions. Security teams have all the visibility tools they need, but struggle to take action at scale on all the problems that need to be addressed.”
“First: hardware will always have my heart. The marriage of physics with a strong business model creates the largest moats and is intellectually exhilarating. Second: despite the challenges facing crypto (both in terms of token prices and public perception) I’m still very drawn to the space. If hardware is the marriage of physics with a business model, crypto is the marriage of mathematics with money. And as someone who has spent a lot of time in the developing world, I think many in the developed world underestimate how broken money is for much of the planet. Finally, I’m excited about bringing technology to legacy industries. Many of the largest industries still have relatively low software penetration. To crack one of these nuts requires a strong, unique insight about how to wedge in.”
“Suddenly computers can read and write. Language is central to how people do their work and interact with others in their personal lives, so I’m beyond excited to see how founders will take advantage of generative AI to build products we can’t even imagine today. That’s not to mention the world of images, where everyone from consumers to product designers can find reasons to have fun with or do work more effectively with generative models. Or the world of code, where 10x better code generation can empower technical people and aspiring toolmakers alike. Across the board in AI, including in infrastructure and developer tools, I think we’re in for a thrilling new wave of technology.”
“Biotechnology is undergoing a manifold revolution, driven by increasingly sophisticated computational capabilities, much-needed laboratory and workflow automations, and a deeper understanding of how we can interact with even the most fundamental building blocks of life. The applications will transform our world, from healthcare to the food we eat and the clothes we wear. I am excited to partner with the data, software and infrastructure founders who will help power that transformation, from conception to commercialization. In a similarly regulatorily complex space, I remain excited about innovations in financial services, both within the sector itself as well as the incorporation of fintech into new businesses.”
“It’s increasingly clear that AI will define the fifth major epoch of computing (after the Mainframe, PC, Internet and Mobile). I’m really interested in how this is going to redefine the consumer landscape. I think the way we make decisions—what to buy, where to go, what to do—will change dramatically as we develop personalized models with long-term memory, personalization and context. I think entertainment—both video and games—will move towards infinite, personalized depth. And I think who we connect with (and how we connect) is going to change massively. Imagine being able to find and connect with your nearest neighbors in some high-dimensional space, regardless of where they might live in the world. I’m very excited by short-term pragmatists, long-term optimists thinking about this space.”
“We’ve entered a new era of tech where, due to the return of a higher interest rate environment, there is renewed focus on operating efficiency and cash flow. Cost advantages are often overlooked and underestimated as the source of sustainable advantage in technology businesses. I’m excited to partner with founders who can build great products to solve customer problems while simultaneously innovating to build exceptional businesses. Many companies are likely to take advantage of the tailwinds that are bringing down costs across a range of sectors, such as automation, artificial intelligence, and the decreasing cost of genetic sequencing. Developer productivity alone has the potential to improve exponentially, with AI based co-pilots enabling transformation and disruption across a broad range of sectors.”
“Thanks to AI, automation and the ability to start a legendary business from anywhere, we’re at the very beginning of a transformational shift in what technology will unlock for companies and consumers. This is a great moment for outlier founders, with a deep desire to fix a problem, who don’t see things the world in terms of how easy something might be, to build their company. With every early founder, I ask myself—what is the dream scenario? If the stars align, what could this company achieve? Experience and history shows innovation happens in all cycles—I’m excited about the founders emerging from this one.”
“The industrial world is currently undergoing a tremendous shift impacted by two mega trends: (1) We see an increasing disruption of global supply chains via the pandemic and geopolitical events that revert the decade-long offshoring trend towards more localized operations. (2) The race to net zero emission is pushing the industrial backbone of the world to rethink products in ways that combine ecological ambitions with a robust business model to also endure economically challenging times. I am excited to partner with founders who accelerate this transition by deploying automation solutions, optimizing procurement, improving engineering collaboration or rethinking these products from first principles.”
“With rapid advances in machine learning / artificial intelligence and computing both large and mobile, ubiquitous computing will re-emerge as a reality, not just futuristic proofs of concepts. Also, adaptive consumer and enterprise offerings creating new long-term businesses will emerge. As always for a founder or an investor, there will be the challenge of separating the wheat from the chaff.”