Sequoia shifts to independent partnerships, separate brands

Roelof Botha, who leads Sequoia globally, and Neil Shen and Shailendra Singh, who head up China and India-Southeast Asia, said in a note to LPs that it has become increasingly complex to run a decentralised global investment business. This is a consequence of the regional businesses not only getting larger but also becoming more diverse in terms of strategy and sector coverage.

“This has made using centralised back-office functions more of a hindrance than an advantage. Additionally, as each entity’s portfolio has expanded to include companies that are becoming global leaders, we’ve seen growing market confusion due to the shared Sequoia brand as well as portfolio conflicts across entities,” they observed.

When Sequoia sought to broaden its global investment activity over 15 years ago, the firm partnered with established local players. For example, Shen joined in 2005, having previously launched Ctrip – now Trip.com – and Homeinns Hotel Group. Singh arrived a few months later from Bain & Company, though he also had start-up experience with Jalva Media.

Sequoia’s decentralised model was based on allowing the local entities to be independent in terms of ownership and investment decision-making. Best practices were absorbed from the US in the early days and certain back-office functions were centralised to ensure operational consistency.

These local entities have become significant players in their ecosystems. Sequoia China raised USD 8.8bn for its latest vintage last year: USD 480m for its third seed vehicle, USD 1.1bn for its ninth venture fund, and USD 3.6bn apiece for two growth-stage vehicles. One of the growth funds, China Expansion I, is said to replace Sequoia’s global growth fund as a late-stage player.

Sequoia India was also on the fundraising trail last year, securing USD 2bn for India venture and growth funds and a further USD 850m for a Southeast Asia-only vehicle. The firm previously addressed both geographies together, with Southeast Asia launching as an offshoot of India in 2012.

The note to LPs also offered some insight into how the businesses have evolved strategically. The China operation is now an active investor in healthcare and consumer as well as technology, has started pursuing buyout deals, and has launched separate funds for infrastructure, public markets consumer-technology, and public markets healthcare.

In India and Southeast Asia, there is an assortment of ecosystem builder entities, such as early-stage accelerator Surge, female founder-focused Spark, and sustainability-driven Build.

The rebranding applies only to the China and India-Southeast Asia businesses. The US-Europe venture capital operation will continue to be known as Sequoia Capital, with Sequoia Heritage and Sequoia Capital Global Equities also operating under the Sequoia banner.

Notably, the separation follows a fundamental shift – billed as a movement towards permanent capital – by Sequoia in the US and Europe. China and India-Southeast Asia were not included.

In 2021, Sequoia revealed that LPs would no longer invest directly in traditional closed-end funds. Rather, they are invited to commit capital to an open-ended liquid portfolio of positions in select companies that the firm has backed through IPO. It serves as the sole LP in future closed-end venture sub-funds, with the proceeds of these investments flowing back into the open-ended portfolio.

The idea is that there will be no more forced exits for expiry of fund life reasons and public shares can be held long after IPO. Conversion to the new structure is said to have been completed in early 2022.

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