Venture Capital Giant Sequoia to Split into Three Entities

Visual China

BEIJING, June 7 (TiPost) – Sequoia announced on Tuesday that it would split into three independent firms by March 31, 2024 in China, India/Southeast Asia, as well as the U.S. and Europe.

Sequoia’s three firms will operate separately. Sequoia China will maintain the use of the brand name “红杉” in the Chinese language and adopt the new English brand name “HongShan.” The firm in the U.S. and Europe will retain the corporate name “Sequoia Capital，” while the firm in India/Southeast Asia will adopt “Peak XV Partners.”

Over the past few years, Sequoia China, led by Shen Nanpeng, has been solely responsible for fundraising and investment decisions. According to a private equity executive in China, Sequoia operates under a typical global partnership structure. In this mechanism, General Partners (limited partners) in each region possess relatively independent decision-making power and report to their respective investment committees.

During the year 2022, Sequoia China raised a total of $9 billion in capital, most of which came from Europe, the U.S., the Middle East, and Southeast Asia. Their investors included pension funds, endowments, and family offices. China emerged as the primary market investor with the largest amount of money raised in China for the year 2022.

Established in 1972, Sequoia Capital has a remarkable investment portfolio that includes renowned technology giants such as Apple, Cisco, Oracle, Yahoo, Google, and PayPal. The company was founded by Don Valentine, who played a pivotal role in its inception. Sequoia India was established in 2006, followed by the establishment of Sequoia Southeast Asia in 2012. The two entities manage a combined capital pool exceeding $9 billion and have made investments in over 400 companies.

Following the successful listing of Ctrip in 2003, Shen, one of the co-founders, made his foray into the investment realm in September 2005. Together with Zhang Fan, the former director of DFJ Global Fund, Shen established Sequoia Capital China Fund. Since its inception, Sequoia China has made investments in a remarkable portfolio of over 1,000 companies. More than 130 of these portfolio companies have gone public, while over 100 non-listed companies have achieved the coveted status of unicorns, representing significant growth and success in their respective industries.

Currently, investment institutions in the U.S. are subject to many investment restrictions imposed by the government. During a congressional hearing last Wednesday, Paul Rosen, Assistant Secretary of the Treasury for Investment Security said that they were planning to impose restrictions on U.S. investments in China’ advanced semiconductor, artificial intelligence (AI), and quantum computing industries.

The specific details of the executive order to be issued by the White House remain unclear. However, Congress has introduced multiple versions of draft investment restrictions.

According to a U.S. attorney, numerous U.S.-based investment firms are already refraining from investing in some Chinese companies in the secondary market due to the associated risks. The implementation of new rules could potentially exacerbate this situation, preventing these firms from investing in the entire restricted sector in the future.

According to the  private equity executive mentioned above, the brand of American institutions was a premium in the past, but now it has become a risk, leading to investment restrictions. However, through corporate separation at the General Partner (GP) level, brand independence can potentially mitigate some of the associated risks.

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