Sequoia's YouTube Investment Memo (2005)
| Author | Roelof Botha (signed RFB), Sequoia Capital |
|---|---|
| Published | September 2, 2005 |
| Format | Report |
| Original | Read the original |
TL;DR — Roelof Botha’s September 2, 2005 memo recommending Sequoia make a $1M seed investment in YouTube, made public as an exhibit in Viacom v. YouTube.
The memo, from “RFB” to Sequoia’s investors, calls YouTube “an interesting seed-stage investment opportunity” whose goal is to be the primary outlet for user-generated video. It proposes a two-stage deal: $1M at seed, then a $4M Series A once milestones are met, for about 30% ownership after the Series A with a ~17% option pool. The milestones are a business plan, a self-serve ad product, five advertisers placing $5,000+ orders, capacity for one million video views a day, and hiring a VP of business development. A CEO search within 90 days is flagged as urgent.
The key-risks section is the most quoted part. It builds a simple revenue model (videos served per day × share monetised × CPM × 365) with three scenarios from $6M to $55M a year, against a current 100,000 videos served per day and 15,000 videos on the site. It also covers competition and defensibility, scalability, balancing supply and demand as media companies such as Turner take notice, and exits, where it notes the lack of strong comparables (Webshots ~$70M to CNET, Flickr under $50M to Yahoo). The memo says Sequoia is “in pole position” three weeks after first meeting the company and recommends proceeding.
The attachments include an investment summary, a competitive analysis (Dailymotion and Vimeo, photo sites, entertainment sites, Google and Yahoo video search, IPTV) with an Alexa traffic chart and comparison matrix, a company-supplied description of the video-clustering infrastructure with per-video cost estimates, and team bios for Chad Hurley, Jawed Karim and Steve Chen.
What it is: A primary source: an investor’s internal memo written at the moment of the decision. It is the version filed publicly in Viacom v. YouTube (S.D.N.Y. case 1:07-cv-02103, Document 194, filed March 18, 2010) as “Botha Exhibit 2”, stamped “Highly Confidential” from discovery. The memo carries only the initials; the court filing ties it to Botha.
Where this came from
- A copy shared on Google Drive.
- Public court record: Document 194 of Viacom International v. YouTube, pages 16–24, in the CourtListener RECAP archive: https://storage.courtlistener.com/recap/gov.uscourts.nysd.302164.194.0.pdf (also on Justia: https://cases.justia.com/federal/district-courts/new-york/nysdce/1:2007cv02103/302164/194/0.pdf).
9 pages. A copy is archived locally against link rot; the header links the original source.