Sequoia will be crowdsourcing its job application process through Talenthouse, a Palo Alto, Calif.-based startup that allows companies and artists to hold design contests for things like album art and logos. According to Sequoia’s design job contest page, which will go live on Talenthouse Wednesday:

Sequoia invites graphic designers to submit their work for a chance at 1 of up to 20 full-time, permanent positions at one of their portfolio companies in the fields of consumer Internet and mobile solutions. This is your chance to get your work in front of some of the hottest companies and get to work in Silicon Valley.

Sequoia will choose the winners from all submissions with special consideration for the top voted entries and for those with user interface experience. Up to 20 designers will be selected to be placed on Sequoia Capital’s shortlist and shared with their portfolio companies.

Perhaps the most surprising part of it all? Sequoia is not currently an investor in Talenthouse. A Talenthouse spokesman tells me the company is backed only by its own CEO Roman Scharf, European seed funding firm 3TS Capital’s Cisco Growth Fund and a number of angels. To date, Talenthouse has taken on about $7 million in outside capital, he said.

Crowdsourcing is hot, particularly in the graphic design space — graphic design marketplace 99Designs recently closed on a $35 million series A round led by Accel Partners. Even so, the high profile utilization of Talenthouse seems like a bold move for a Sand Hill Road stalwart like Sequoia. Could the firm’s use of Talenthouse for its latest hiring effort essentially be a very public tire-kicking session?

“Talenthouse cannot comment on venture capital firms it may or may not be speaking with,” the company’s spokesman told me. Well, whether it’s speaking with Sequoia or not, one thing is for sure: They are working together. And that in itself could speak volumes.

Image courtesy of Flickr user Tess Aquarium.

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The launch of a new mobile app called Color on Wednesday has caused a lot of buzz — not so much because of the app itself, but because of the massive sum of money the company raised before it even launched. A group of funds, including Sequoia Capital, gave the company $41 million, and Sequoia’s chunk (as Color proudly noted) is more than the fund invested in Google. Is this new app really as revolutionary as that implies? Maybe. But what’s more likely is that the VCs involved are betting the team behind Color will come up with something worthwhile for that $41 million, and they don’t particularly care what it is.

Color and its supporters claim the app creates a new kind of paradigm for photo sharing, in the sense that you share pictures not just with friends or a small group, the way you would with Instagram or Path, but also with people who happen to be in the same place you are. This makes it more like Foursquare — or a group-messaging app like Beluga — than existing photo-sharing services. And the app supposedly learns from your behavior and creates ad-hoc groups based on whom you are interacting with (see Darrell Etherington’s post for a more in-depth look at the app’s strengths and flaws).

Do people want to suddenly share photos with random strangers based on the fact that they happen to be at the same club? That’s the bet Color seems to be making. Which — as more than one person has observed — makes it a little odd that the company didn’t launch at SXSW, the giant music and technology festival that just wrapped up in Austin, Texas. An app based on something so real-time and social seems almost perfectly matched to that kind of social environment. (Color’s huge funding round has already sparked a number of satirical takes on the app.)

Sequoia said on Twitter that a company like Color comes along once or twice in a decade, and that’s why it decided to give the startup more money than it ever has to a pre-launch company. (Venture investor Eghosa Omogui says the funding implies a post-money valuation that is likely north of $100 million.) But Sequoia is likely talking more about the team involved than the app itself, since the company is headed up by Bill Nguyen — who sold his music-sharing service LaLa to Apple in late 2009 — and includes Peter Pham, founder former CEO of BillShrink, as well as former LinkedIn Chief Scientist DJ Patil.

Is betting that kind of money on a team, regardless of their idea, a good bet to make? Some would argue it is. In a recent blog post, Union Square Ventures partner Fred Wilson wrote about how much he regrets not investing in what became AirBnB. He thought the idea was dumb, but the team behind it was clearly motivated and represented all the things he likes to invest in. In other words, the team was more important than the idea they were pushing at the time. (Paul Graham of Y Combinator has posted the email exchange in which he tried to convince Wilson to invest in AirBnB). “We missed Airbnb [sic] even though we loved the team,” Wilson says. “Big mistake.”

Chris Dixon, an angel investor and co-founder of Hunch.com, made a similar point in a recent blog post about Dropbox. Dixon says when he first encountered the company, he thought it was a copycat file-sharing service just like hundreds of others that had been launched around the same time, and he figured its chances of success were slim to nil. Later, the company raised money (from Sequoia, coincidentally) and Dixon says he eventually realized the team was what was important, not the idea.

I think the only way they could have made that decision was by ignoring the space, competitors, etc. and simply investing in a super talented person/team. Dropbox is one reason I now have a strict rule to only invest in teams… you should always invest in people over ideas.

So will Nguyen and the rest of the star team behind Color manage to do something that is worth all of that investment? That’s the $41-million question. One thing is for sure: Another photo-sharing app, regardless of its unusual features, probably isn’t going to cut it. And it’s probably worth mentioning that the Valley is littered with the skeletons of high-profile startups that launched with big ambitions and lots of money.

Post and thumbnail photos courtesy of Flickr user Julian Fong

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With all the fuss surrounding the recent “AngelGate” meetings and the tension between angels and super-angels and traditional venture funds, it’s instructive to listen to one of the legends of the Silicon Valley VC business — Sequoia Capital founder Don Valentine — talk about the approach and the thinking that led to his investments in companies like Apple, Cisco, Google, Yahoo and Zappos. In the video embedded below, he talks to a group of students at the Stanford University Graduate School of Business about what matters and what doesn’t.

Valentine says that many people assume that Sequoia has been so successful because the fund backs “the best and brightest, the greatest managers and all that stuff [but] we do not.” The only thing that really matters, he says, is the market.

“We have always focused on the market — the size of the market, the dynamics of the market, the nature of the competition — because our objective always was to build big companies. If you don’t attack a big market, it’s highly unlikely you’re ever going to build a big company.”

As a result, the Sequoia founder says that the fund isn’t really interested in where an entrepreneur went to school, or whether they have any actual business credentials — all Sequoia is interested in is the size of the potential market they are trying to attack, and the potential value of the problem that they are trying to solve.

“We don’t spend a lot of time wondering about where people went to school, how smart they are and all the rest of that. We’re interested in their idea about the market they’re after, the magnitude of the problem they’re solving, and what can happen if the combination of Sequoia and the individuals are correct.”

In some cases — as with Apple — an idea about the potential market can lead to multiple investments in all of the various players in that ecosystem, Valentine says. Apple “had in mind the idea of you all having your own computer,” he tells the graduate class at Stanford, and the implications of that involved the need for memory makers and disk-drive companies and manufacturers of all of the other parts that were needed for personal computers. So Sequoia wound up investing in more than 15 companies in the PC category, including game-maker Electronic Arts, which was created in the Sequoia office.

The Sequoia founder also says that he had an advantage over some other VCs because he “could see the future,” meaning he understood the transformation that personal computers and microprocessors were going to unleash because he worked at Fairchild Semiconductor and co-founded National Semiconductor. For Valentine’s thoughts on Steve Jobs’ marketing abilities, the failure of Sony and Xerox (which he calls “one of my favorite tragedies”), the importance of storytelling and the launch of Cisco, please see the full video embedded here or at YouTube.

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Jive Software has raised a $30-million round of financing from two legendary Silicon Valley venture capital funds — Kleiner Perkins Caufield Byers and Sequoia Capital — that the company says will help it take the concepts of social media and integrate them into the enterprise. Jive recently launched an ambitious product road-map that includes an all-in-one social dashboard for companies called “Jive What Matters,” as well as an open API and an open application marketplace. It remains to be seen, however, whether companies want to integrate social-networking principles and behavior into their businesses, and how they choose to do so.

New Jive CEO Tony Zingale, who took the position in February after previous CEO David Hersh became chairman of the company, said in an interview that the investment from Kleiner Perkins and Sequoia was a vote of confidence in Jive’s vision (Sequoia also participated in the company’s previous round of financing, which raised $15 million in 2007). The last time the two Sand Hill Road firms invested $30 million in a startup together, “it was a company called Google,” said Zingale. The Jive CEO said the company may use some of the financing round for acquisitions.

Jive is one of several enterprise-software providers trying to bring social-networking principles into a corporate setting, a market Zingale says has yet to benefit from the productivity boosts and other benefits that come from enterprise 2.0. The past 10 years, he said, “has been a lost decade in enterprise software.” Other providers going after aspects of the same market include Socialtext, Salesforce.com, with its recently launched Chatter feature, and offerings from Microsoft (through its Sharepoint suite) and IBM (with Lotus).

Zingale took some shots at Salesforce and other companies he said are simply trying to “bolt on” social features to existing legacy products that are “masquerading” as enterprise 2.0 solutions. “Salesforce is running around talking about [Chatter] being the Facebook of the enterprise,” he said. “But they still have a CRM [customer relationship management] solution that is the bulk of their business.” Zingale said Chatter was “a great marketing attempt, but it falls far short of delivering on the value that customers want in terms of collaboration inside and outside the company.”

Embedded below is Zingale’s keynote presentation from the Enterprise 2.0 conference last month in Boston:

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Sequoia Capital has bought a stake in Klarna AB, a European payments provider, and Michael Moritz, a partner at the legendary Silicon Valley venture firm, has joined its board of directors. The amount of the investment wasn’t disclosed, but it makes Sequoia the single largest shareholder of the Stockholm-based company. The second-largest shareholder is Oresund Investment AB, a $7 billion Swedish fund.

“Klarna has done a fabulous job serving the needs of merchants and consumers in Europe’s e-commerce market,” Moritz said in a statement. “With e-commerce growing rapidly across the E.U., where card based payments are only 1/3 that of the U.S., Klarna has an incredible opportunity to be the most trusted solution in the $40 billion global payments market.” Sequoia, which was an early investor in online payment provider PayPal, has investments in a number of other e-commerce companies, including MarketLive.

Klarna was founded in 2005 and, and provides mobile payments and other e-commerce solutions in several European countries, including Sweden, Norway, Denmark, Finland, Germany and Holland. It’s reportedly the largest European provider of in-store credit and invoice-based e-commerce payments. It has about 200 employees and handled transactions worth 500 million euros ($640 million) in 2009 from more than 5,000 merchants. The company closed a Series A financing round of 15 million Swedish krona in 2007.

Post and thumbnail photos by Brian Solis, courtesy of Wikimedia Commons.

David Selinger

Anticipating that a financial crisis like the one we’re currently experiencing wasn’t far away, I’ve run my company, richrelevance, on a zero-fat budget, raising small rounds of capital to ensure our team built the discipline to operate with small budgets. Yet, anticipation of the downturn does not make me immune to the shift. External risks in every business have changed. None of us will go through the next 18 months without significant impact.

But many entrepreneurs who saw the now-famous “Sequoia deck” unfortunately took its conclusions to be a tenet of truth and acted on it — perhaps too hastily. The folks at Sequoia are smart, but they aren’t necessarily smarter than you or me at running our businesses. This is the crux of the issue: While this market shift is, in fact, a 5- or 6-sigma event, what we do with that information is still within our domain.

Reacting blindly to a situation is wrong — being reactive is bad for your business. There’s a process to responding to urgent situations, much like triage in a hospital, and by understanding, analyzing, acting and repeating we can surmount these challenges. Now is a unique time when you can deepen customer relationships by advising them, seeking input, sharing ideas, etc. Below are four steps to responding the current economic situation without being reactive.

1. Identify and Understand
Acting on bad information is worse than not acting at all. My gut reaction to this shift was, “I’m sure glad we build enterprise software and that I’m not a social network,” but this thought is wrong and fraught with (incorrect) assumptions. While not all social networks will survive, their inherent value has not disappeared. And, while the innate value of the applications we’re building has not deteriorated, the amount (and way) we are paid for these services may change.

To protect our businesses, we need to keep a close eye on market dynamics. Talk to customers, partners, and vendors. Find out what they’re thinking and seek their input — this is a unique time to establish new dialogues and chart the course for deeper, more beneficial relationships.

Read. Gather data. Then, go sleep on it.

2. Analyze Risks
The biggest assumption from the Sequoia presentation is that the downturn is so large that it will affect us all equally and uniformly. This is patently false. As entrepreneurs, we believe the opportunity in our market is so great that it outweighs the risk. Sit at a whiteboard with your management team and consider the new risks in the equation. Break these down into two groups: risks I can control (internal) and risks I can’t control (externalities). Much like a triage leader, identify the severity and urgency of each risk in how it affects the bottom line, how much capital you have on hand and how much you can absorb long term. The key is to be honest with yourself.

3. Act
First, stop any bleeding. If your burn rate outpaces revenue, cut — dramatically. If you have contracts that put you underwater, address those. Next, address internal risks. For example, if you finish X product line you may increase revenue with existing customers. Yet if X product requires long-term R&D and there’s not enough cash to get you there, put the project on the chopping block. Finally, proactively shore your business up against externalities — i.e., “What happens if my customers don’t pay on time?” Keep in mind: The stakes are higher than ever. Use your advantage as a startup to do more things better and faster than the competition.

4. Close The Loop
You’re not done. Iterate. Constantly communicate with your team about how you’re executing against goals. Stay engaged with customers. Re-engage the whiteboard regularly.

None of these principles are new. This is how we should be running business regardless of the economy. The climate may have changed, but the rules of good business are still the same. Failure is still not an option. Freaking out is not either.

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But the bottom line is that it is superbly hard, even in good economic times, to really impact the world with an innovative new product from a small company. The odds are hugely stacked against you. Would-be entrepreneurs and investors alike tend to forget this. They grow complacent when they are bailed out of mediocre situations or make money far exceeding what they deserve. They begin to believe their own BS. A troubling sense of entitlement lulls them into a false sense of security that they are not actually fighting for their economic lives, every minute of every day. It happened during the dot-com bubble and the housing boom, and now it’s happening on Wall Street.

The truth is, founders should be ruthlessly hard on themselves irrespective of the economic climate. Treat every break you get as the last miracle left on Earth. You should always be asking yourself: What could be done better? What’s not working? How can we be more capital efficient?

Any entrepreneur who woke up this morning and said, “Hey, I found $200,000 that I can cut out of my burn rate,” should be taken out to the woodshed. The fact is, cutting fat should be a standard operating procedure, not a reaction to a financial crisis. A knee-jerk reaction can also cut too deep, stalling innovation and growth, with the same inexorable end: failure. The same is true for VCs. Investors cannot afford to be intellectually lazy in easy times, only to wake up surprised by a changed environment and reactively change their investment tone.

You need to build your business, or your portfolio, based on underlying fundamentals that will carry you through good times — and bad.

Here are a few things I think all entrepreneurs should do now:

1) Reaffirm the value-creating milestones for your business.

2) Focus your capital on hitting them in the most efficient way possible.

3) Ensure that your current cash is safe. Is it invested in stable corporate bonds (like GE)? Or is it sitting in financial institutions, even the finance arms of manufacturing companies (like GMAC)? Are your lenders likely to deliver money they have agreed to lend? Do your investors have reserves for future rounds?

4) Look at your burn rate to make sure current expense rates still make sense. This has more urgency for later-stage companies that are selling a product, but those in R&D mode should always be thrifty.

5) Lead. Reaffirm the viability and vision of your company to the troops. This will counterbalance people’s tendencies to worry about their jobs and dreams, even decrease the time spent watching stock tickers.

Although it is too soon to tell what the true extent of the recent weeks’ turmoil will be, the secondary effects of this crisis will likely prove worse for entrepreneurial companies. Between skittish customers and the herd mentality that often manifests itself in the venture community, the startup jungle will certainly be a less forgiving ecosystem for awhile.

However, while funding will be harder to come by, there will continue to be capital available for really great companies and good ideas. Keep in mind that many of our greatest companies were founded during, or toward the end of, recessions, among them IBM, Hewlett-Packard and Microsoft.

Bryan Roberts is Managing General Partner at Venrock.

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OK, you’re thinking, but I’m founding a company. I don’t have time to think about anything other than cash flow and customer acquisition, much less take up new hobbies. But here’s one quick way to do become interdisciplinary: When you read, read stuff that has nothing to do with what your company does. (You can make time to read.)

Life Optimizer had a great post last week that explained three reasons why diversifying your reading is a shortcut to brains-building.

1. Avoid boredom
I don’t know about you, but reading the same topics again and again makes me bored. Even for topics I’m passionate about, I will be more refreshed if I also read other topics once in a while.

2. Arbitrage knowledge
The art of arbitrage is important for living smart, and diversifying your reading allows you to do knowledge arbitrage. Knowledge arbitrage means taking ideas from one field to be applied to another field. If you read only one or two topics, it’s difficult to do that.
3. Cross-pollinate ideas
Continuing the idea of arbitrage, not only can you borrow ideas from other fields, you can also combine ideas from different fields. Often it will give you “original” ideas since nobody has seen such combination before. Of course, you can only cross-pollinate idea if you have different kinds of idea to begin with, and that’s why you should diversify your reading.

It turns out this is a tried and true method, used by some of your business icons — like VC Michael Moritz and Apple founder Steve Jobs.

Last July,
the New York Times revealed what several hyper-successful business leaders read — and it ain’t business books.

For example, Moritz, the Sequoia VC who funded Google, Yahoo!, PayPal, Kayak.com and others, said:

“I try to vary my reading diet and ensure that I read more fiction than nonfiction,” Mr. Moritz said. “I rarely read business books, except for Andy Grove’s ‘Swimming Across,’ which has nothing to do with business but describes the emotional foundation of a remarkable man. I re-read from time to time T. E. Lawrence’s ‘Seven Pillars of Wisdom,’ an exquisite lyric of derring-do, the navigation of strange places and the imaginative ruses of a peculiar character. It has to be the best book ever written about leading people from atop a camel.”

The Times also reports that Apple founder Steve Jobs once had “an ‘inexhaustible interest’ in the books of William Blake — the mad visionary 18th-century mystic poet and artist.”

We wrote yesterday about burnout, and the risks associated with it for overworked entrepreneurs. Our authors recommended sleep to avoid burnout. But diversifying your reading list with recreational (or at least non-business) books, may be an even more flexible way of forcing yourself to take time out from the day job because you can do it in the waking hours that might already take you away from proper work: e.g., while you’re in transit, on the train, plane or bus; while working out; or over your lunch break.

Whenever you do it, reading is just another means of resting, while at the same time a means of sharpening those mental tools. So try a novel!

What do you do to sharpen your mind, or to avoid burnout?

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1) Mr. Armchair. He’s a Friday afternoon Chairman. He knows exactly what he’d do as board member of facebook, Google, MySpace.,YouTube. Too bad his portfolio company’s don’t get the same enthusiastic coverage.

2) Mr. One-Hit-Wonder. Yes he sold Postage.com for $200 million (and kept $15 million) so if you wanna hear war stories from the ’90s, take this GSB alum’s money.

3) Mr. Spray-n-Pray. He cites being founding CEO as his Operations experience. (Translation: He was a interim CEO for his last venture firm before company/portfolio implosion and subsequent fund implosion. His fund is a catch-all and he tries to participate in every Sequoia backed deal.

4) Mr. Revisionist Historian. Knowing Pierre Omidyar, living near him in Hawaii and investing in eBay after it went public doesn’t count for didly.

5) Mr A**!@#!-BFF all rolled up into one. He remembers to comp you tickets when your alma mater rolls into town for Stanford hoops. He’ll choke stock outta your co-founder just to up his percentage from 42.5% to 46.25%. On your board, he roasts you one quarter and sing accolades the next. He’s three times divorced and a heck of a good time to go to Vegas with.

6) Mr. Blue Blood. His IQ is double your 155. He’s 5th-generation money. He’s so far ahead of the curve that he married the trophy wife 1st (vs. other VCs whose Trophy is 2.0). His kids (age 2/4/7) can debug your DB using their PlaySchool Mac and will be smarter than you by June.

7) Mr. IRR. He’s old school and he’ll hit his rate of return goals even if he has to give birth in the first person. He goes into deals at a 45 degree entry angle. His bio doesn’t list his alma mater because the 30 companies he IPO’ed take his alloted two pages.

8) Mr. X-Product Manager. He says he’s seeking alpha, but has zero stomach for beta. Beta here, of course, meaning risk not software version. If team + market opportunity + cap table + due dilligence + angel syndicate are in perfect order, he’ll pull the trigger. Number of winners = 0, but he can pee on a parade seven ways to Sunday.

9) Mr. Regurgitator. At HBS, he did well by parroting and that talent has served him well. Once, he culled the wrong case study resulting in a buy rec on BioPay and wallah! Exit-a-mundo! He’s so lucky that in ’08 he’ll be reverse-justifying his funds success.

OK, I lied. There are 12 of them, but if I told you this, I didn’t think you’d keep reading…

10) Mr. Imitator. Read the GSB case study about a young vc getting 20% of a company for nothing (an urban myth) and has been trying to replicate it ever since.

11) Mr. Retired-on-the-Job. He’s rich but mentally checked out. Has ‘income on his cash’ is greater than ‘carry on his fund’ even if they “discover” all 3 of the next Googles. Has tracking software for houses, property, assets. One time he bought a car that he already owned. Uses duck9 sms alerts — not for credit card bills, but for which girlfriend in Austin, San Fran, New York needs ‘xoxoxox.’

And now, A Parlor Game: Match the statements below with VCs above. (Answers will be posted tomorrow!)

* He’s caught in ‘Never, Never Land’ between no real operations experience and no real finance experience.

* Extra dangerous cuz he’s never had a W2/1099 over $200,000.

* Woo him by buying his kids SAT test prep books.

* Thinks pretexting is a great way to do due diligence.

* Brings a checkbook to the Menlo Park Starbucks.

* Has his assistant print out email cuz he needs the 24 point font.

* Would interrogate your dad and calls registrar’s offices when reviewing VCs or … product demos.

* Knows the MIT of India, China, and Timbuktu.

* He’s not big on Sand Hill, but in europe he’s huge.

* Makes you work for the money by slicing his $2 million into 10 pieces with water marks you need to hit for another traunch.

* Knows all of your present and future mistakes.

* He will make a half dozen intros that are revenue opps. But he alredy knows you’ll drop the ball, and so has a CEO ready to replace you after the B-round

* He just called. He left a vm that he’ll swing by in a limo and pick you up in 15 minutes for a concert at Shoreline. You better find some non-open-toed form of footwear ASAP.

Serial founder Larry Chiang is a frequent contributor to Found|READ. His earlier posts include: How to Work The Room; and 8 Tips On How to Get Mentored .
Larry’s current company is duck9, which offers “deep underground credit knowledge,” educating student borrowers on how to establish and maintain good credit, and endeavors to graduate them with a FICO over 750. Read more about Larry and his first company, United College Marketing Services, in the Oct. 15 issue of Business Week.

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