Late-Stage Drives Sequoia Capital’s Growing Funds

In the world of venture capital portfolio theory, it’s said that portfolio returns follow a power law distribution: roughly 90 percent of the gains come from 10 percent of the portfolio’s positions. And, increasingly, it feels like venture capital firms’ LP capital raises follow a similar pattern. It seems like there’s a lot of money sloshing around the market, but the bulk of it is going to a relatively small number of firms.

Like its arboreal namesake, Sequoia Capital is, by Silicon Valley standards, old and deeply-rooted. It’s also big.

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For the past few months, rumors have been swirling that Sequoia Capital is raising a colossal growth-stage fund. On Tuesday, the Financial Times reported that the stalwart firm has already closed $6 billion of what could be an $8 billion pool of capital.

Let’s run with that $8 billion number for a second. If the average U.S. $100 bill is 0.0043 inches (0.109 millimeters), and you were to somehow stack 80 million Benjamins ($8 billion) on top of one another, it would be 28,666 feet tall, approximately equal to 104.24 times the height of General Sherman, a 275-foot sequoia tree living in Sequoia National Park.

Of course, that’s just one of Sequoia Capital’s many, many funds.

Sequoia Capital’s geographic scope is global; it manages geo-targeted funds aimed at startups in markets like the U.S., China, India, and Israel. And although the firm invests across all stages – ranging from seed through its deal scout program, all the way up until a company goes public – its funds targeting the latter half of the cycle have been a growth area for Sequoia, at least from an assets-under-management perspective.

Take its latest growth fund as an example. At $8 billion, Fund III four times the size of its $2 billion Global Growth Fund II and over eleven times larger than its first, as the chart below shows.

There isn’t a way around saying that this fund is huge.

But it’s not the only growth fund Sequoia is currently raising. Last week, Sequoia Capital China filed for its fifth growth-stage fund. The Wall Street Journal reported in March that the fund is targeting between $1.6 billion and $1.8 billion for China Growth Fund V. As it happens, that’s twice the size of its fourth China Growth Fund and over three times larger than its first.


The Wall Street Journal report from March said Sequoia “is raising three funds totaling up to $2.5 billion for China.” With somewhere between $1.6 and $1.8 billion accounted for in the growth vehicle, that leaves somewhere $700 to $900 million to divvy up between two other funds. Sequoia Capital filed initial paperwork for China Venture Fund VII and China Seed Fund I in June.

That same Journal report said Sequoia is targeting up to $1 billion for its eighth U.S.-focused growth fund and $550 million for its sixteenth U.S. venture fund.

However, it’s still small potatoes compared to SoftBank’s Vision Fund, a mind-bending $100 billion capital pool that’s shaping the arc of the global venture capital market. As The Economist described in its May profile of the Vision Fund, “incumbents will need to bulk up.” It continued, “Sequoia Capital, one of Silicon Valley’s most famous names, is raising its biggest-ever fund in response.”

Patricia Nakache, a general partner at Trinity Ventures, told Fortune in March that the VC market has “bifurcated into this world of ‘haves’ and ‘have nots.’” The Vision Fund, she said, “has created this layer of ‘super-haves.’ And the ‘super-haves’ are almost untouchable in a way because they’re in a whole different stratosphere from a competitive perspective.”

All signs point to a conclusion that by raising such a large, globally-scoped growth-stage fund, Sequoia Capital is trying to compete against a new queen- and kingmaker on the block.

Illustration: Li-Anne Dias

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