Sequoia raises $8.8b for China funds
Sequoia Capital has hit the hard cap on each of the four funds in its latest China vintage, accumulating USD 8.8bn for deployment in seed through late-growth rounds.
The fundraising process began about three months ago amid claims that the firm was looking to diversify an LP base that has historically been US-heavy and populated by endowments and foundations. There was no shortage of demand – two LPs told AVCJ the funds were oversubscribed and that their allocations were cut back.
AVCJ previously reported that Sequoia was seeking USD 400m for its third seed fund with a hard cap of USD 480m. Its ninth venture vehicle had a target of USD 900m and a hard cap of USD 1.1bn. China Growth VII and China Expansion I – a new addition in this vintage, said to replace Sequoia’s global growth fund as a late-stage player – both had targets of USD 2.9bn and hard caps of USD 3.6bn.
A source close to the situation confirmed that the hard caps had been reached. Sequoia China declined to comment.
The last time Sequoia came to market in 2020, it raised USD 3.68bn: USD 180m for seed, USD 700m for venture, and USD 2.8bn for growth. This compares to USD 2.5bn across the three strategies in the previous cycle. Significant increases in recent vintages have been in the growth space as Sequoia enhanced its capacity to back companies through later-stage rounds. The firm has also become more active in healthcare as well as technology.
The bumper fundraise comes as the broader GP community in China faces unprecedented challenges. A series of regulatory crackdowns on consumer-facing technology last year shook investor confidence as large players were hit by antimonopoly probes, tech-enabled tuition platforms were reclassified as non-profit, and additional oversight was introduced for offshore IPOs.
China PE and VC managers raised USD 20.1bn for US dollar funds last year, consistent with the average for the previous five years. However, more than 70% of the capital was raised before the end of June. Around this time, US-listed Chinese concept stocks underwent a significant correction.
Fundraising for 2022 to date is USD 7.3bn, according to AVCJ Research. VC managers alone have attracted USD 1.7bn. Various LPs are said to be reviewing their China exposure, and in some cases, holding off on commitments until the regulatory and geopolitical picture becomes clearer.
On the private equity side, FountainVest Partners recently closed its fourth fund on USD 2.9bn after 20 months in the market; previous fundraising processes took no more than eight months. Meanwhile, some VCs are already adapting to a new normal. For example, Legend Capital has excluded consumer internet from its latest tech fund and Joy Capital has set a more modest target than in past vintages.
The Sequoia China affiliate was established by Neil Shen in 2005. He remains founding and managing partner of the business.
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