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Only twenty investments in a lifetime
Three screening questions
Doug Leone's first question is whether he would put his kids' money into it, which forces a judgment about quality. The second is whether this is one of the twenty investments he will make in his life. The third is whether it could return the whole fund.
The math behind twenty
The twenty comes from lifetime math: there may be two hundred investments an investor could make, and many of them would return two or three times the money. He wants only the ones that can return a hundred times, the outliers that drive tremendous returns.
Bigger gains over time
Sequoia's best single gains kept growing across his career: a hundred million dollars first, then five hundred million, a billion, and five billion, until Alfred reached ten billion. Now Sean's SpaceX investment has a shot at twenty billion or more, though it hasn't been cashed out yet.
Why must one deal be able to return a fund?
Most venture investments return less than the money put in, and a few return a lot. If a fund holds a mix of such deals, only the outsized winners lift the whole fund meaningfully above its original capital. So a common rule of thumb in venture is that a deal worth making should have a credible path to returning the entire fund by itself.
How did SpaceX get to be so valuable?
Elon Musk founded SpaceX in 2002. In September 2008 its Falcon 1 became the first privately developed liquid-fueled rocket to reach orbit. In December 2015 a Falcon 9 first stage landed upright on a pad after launch, the first time an orbital-class booster had done so, which opened the way to reusing rockets.
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