Sequoia marches startups to cut costs or face a "death spiral" amid a stock market downturn

One of Silicon Valley's most triumphant venture capital firms sees no immediate economic recovery also is warning portfolio companies to draw their belts in the meantime.

In a 52-page presentation spotted on CNBC, Sequoia Capital outlines some of the risks that make it difficult for architects to raise money and work. The note, first reported by The Information, was presented last Monday by Sequoia partners Alfred Lin, Ruloff Botha, Doug Leone, Karl Eschenbach, and others.

"We believe this is a Crucible moment," reads the presentation. "First and foremost, we need to recognize a changing environment and change our mindset to respond with purpose, not regret."

Sequoia, known for its early investments in Apple, Google, also Airbnb, is sounding the alarm about another crisis. The company released a statement titled "R.I.P. Good Times" as the economy melted in 2008, writing the widely read "Black Swan" note in the early days of the coronavirus pandemic.

In its latest issue, Sequoia points to ongoing inflation and geopolitical conflicts, limiting the possibility of a "quick fix" for measures such as rate cuts or quantitative easing.

Sequoia partners said they misjudged one factor in the Black Swan memorandum: underestimating the post-Covid monetary and fiscal policy response "and the area of ​​distortion it creates in markets."

"This time, many of the tools were out of stock," the presentation read. "We do not think this will be another sharp correction followed by a V-shaped recovery as fast as we saw at the pandemic's start.

Sequoia joins venture capitalists and Twitter investors in warning founders about the current macroeconomic environment.

As Lightspeed said in a blog post last week, "the booming days of the last decade are over."

Tech companies with tremendous growth during the pandemic are already taking cost-cutting steps through layoffs or hiring freezes. Klarna said that it plans to cut about 10% of its global workforce, following similar announcements from Robinhood and Netflix. Facebook moms Meta, Uber, and Nvidia are among the companies slowing down reCENT