Two Ways to Build a Firm

Published November 5, 2026, the day after The Sequoia of Tomorrow and Is Private Equity Cooked?. Prasad’s announcement post says the pairing reminded him of the Goldman-versus-JPMorgan comparisons he used to discuss with partners while an analyst at “200 West” (Wrote about @sequoia & @a16z… (tweet)).

Summary

Prasad starts from Ho Nam’s observation that the two posts make a striking pair: Sequoia flattening and narrowing, a16z building toward something like a full-scale asset manager. Rather than “old-school venture versus PE-style scale,” he proposes that each firm is betting on a different way a franchise compounds. Sequoia bets on selection: fewer choices, more attention behind each, more weight per choice. a16z bets on breadth: enough products, people, infrastructure and brand to compete for more of the best companies, and more of each LP’s total allocation. Both can work.

Goldman Sachs: the value of choosing. Goldman partners described the firm as resting on two lions, investment banking and markets, with the client relationship above any product. The defining instinct was business selection. After Goldman defended Electric Storage Battery against Inco’s hostile bid in 1974 (the “white knight” defense, which failed), John Whitehead set a policy that the firm would not help launch hostile tender offers. That constraint made Goldman the defender of choice in contested situations, a position Prasad says it still holds in activism defense. Partly this was necessity: Goldman could not match the biggest balance sheets, so it won on advice and on bringing the whole firm to a client. Because it is choosy, its choices carry information.

JPMorgan: the value of breadth. Goldman people called JPMorgan “the Walmart of banking,” not as an insult: it can offer a client nearly any product. Jamie Dimon’s “fortress balance sheet,” a business described as complete, global, diversified and at scale, and product businesses with their own leadership behind the coverage banker. The economics show both work: in 2025 Goldman won M&A advisory, but JPMorgan out-earned it in total investment banking fees by more than $1 billion once capital markets are counted.

Sequoia’s “main thing.” Prasad lists the memo’s changes (~$10B raised; London closed; Arc shut; Scouts sunset; early and growth merged; partnership flattened; Monday meeting ended) and the phrase X reached for, “keep the main thing the main thing,” credited to Stephen Covey and lately to Ravi Gupta’s “Focus” episode of Invest Like the Best (August 2022), which traces how the idea shaped his turnaround work as Instacart’s CFO and COO. Sequoia is making Goldman’s bet. Its objective is quality, not scale; it would rather constrain capital than accept weaker marginal returns. The flywheel: selectivity sharpens the signal of each investment, signal attracts stronger founders, stronger inbound allows more selectivity. Merging the teams makes the founder receive the institution rather than one silo. The tradeoffs: a selective firm can miss categories, depends heavily on individual judgment (so departures cost more), and in a market producing many giant companies at once, scarcity can become a constraint.

a16z’s “everything else.” a16z has kept building out: funds at nearly every stage, dedicated sector teams (infrastructure, bio, American Dynamism), a deep bench and a large platform. It is tempting to call this indexing, but Kha’s essay is explicit that the aim is the top 5%; a16z competes for top companies at a volume few can match, its brand working like JPMorgan’s. Prasad cites David Haber’s “Firm > Fund”: a fund optimises one vintage’s returns, while a firm invests in assets that compound across vintages (brand, recruiting, distribution, specialist teams). Once built, asking for a larger share of an LP’s allocation follows naturally. The tradeoffs mirror Sequoia’s: complexity, weaker signal per investment, harder-to-avoid portfolio conflicts, coordination costs, and the question of whether the next dollar earns what the last one did.

The organization follows the strategy. Both are building institutions; the difference is the center of gravity. For Sequoia it is the investing partnership and its judgment; for a16z it increasingly includes the platform around the partnership. “One firm is trying to make each decision matter more. The other is trying to make the institution capable of making more important decisions.”

Neither stays put. The frame Prasad finds most useful is Mike Vernal’s (I think the Europe is… (tweet)): venture’s split into seed, venture and growth is Clayton Christensen’s modularity theory applied to venture, and that same modularization produces the Innovator’s Dilemma, leaving firms optimized for the old regime. The answer is to re-integrate and attack the new regime simply, knowing the cycle repeats in a decade. On that reading Sequoia’s merger is a reintegration after years of adding London, Arc, Scouts and the China and India businesses (later separated). Banking shows the same cycle: Goldman launched Marcus in 2016 and began unwinding it in 2022, while JPMorgan kept adding, agreeing in January 2026 to take over the ~$20B Apple Card portfolio. He cautions against reading the analogy too literally: the two venture firms overlap heavily (that week Shaun Maguire said he and Marc Andreessen co-led Cathedral’s founding round), and star investors move between firms. The distinction is one of emphasis, and asking which model wins is probably the wrong question; the lasting advantage is recognizing when the model that made you successful has stopped fitting the market.

Notable quotes

“Sequoia and a16z are making different bets about how an investment franchise compounds.”

“A great deal of what makes Goldman Sachs, Goldman Sachs comes down to picking.”

“A founder backed by Sequoia gets noticed partly because Sequoia says no so often.”

“The firms that last will be the ones that can tell which moment they are in.”

Full text

Connections

• The Sequoia of Tomorrow and Is Private Equity Cooked?: the two posts this essay compares.
• Don’t Call It a Comeback: Lowercarbon’s post-midterm strategy note from the same week.
• Goldman Sachs · JP Morgan: the banking analogy.
• Mike Vernal · Clayton Christensen · Innovator’s Dilemma · The Innovator’s Dilemma: the modularity frame.
• Ho Nam: the observation the essay starts from.
• David Haber (“Firm > Fund”) · VC Platform · Megafunds · Focus · Stephen Covey
• The Segmentation of the Venture Industry: the seed / venture / growth split that Vernal calls modularization.
• Sequoia · a16z · Shaun Maguire · Marc Andreessen · Invest Like the Best