Sequoia Splits Its Global Fund Into 3 Separate Businesses

Sequoia Capital announced this morning that it is breaking its global fund into three independent businesses that will chart their own paths going forward.

Sequoia will continue to invest in the U.S. and Europe. Its China business will keep its name in Chinese and be known as HongShan in English. And the India and Southeast Asia business will become Peak XV Partners.

“It has become increasingly complex to run a decentralized global investment business,” the firm said in its announcement signed by the leaders of each of its regional funds. But more significantly, as local companies compete on a global basis, the firm is seeing more portfolio conflicts which could lead to passing on opportunities to invest in competitive sectors.

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Even within a region, the firm faces an issue with competition. Sequoia divested from Finix due to perceived competition in payments with its portfolio company Stripe. In an interview with Forbes, the firm said the breakup is not due to geopolitical tensions.

‘Patient capital’

Sequoia Capital had already made a significant change to its fund structure in recent years. It announced that a single fund for its U.S. and European business would distribute to sub-funds, stating the “10-year fund cycle has become obsolete.” As part of that November 2021 announcement, months before the market correction, Sequoia restructured itself as a registered investment adviser. This new role allowed the firm to set itself up to retain stock when its private companies go public, and to invest in public companies as well as opportunities in crypto and Web3.

In an early 2021 interview, the firm’s steward Roelof Botha emphasized the firm’s “patient capital” approach. The firm will often wait years before it disperses shares to shareholders, he said.

“Sometimes people don’t realize how patient we are,” Botha said “And we’ve earned this right with our LPs, to have patience with distributions.”

The regional funds have operated from the start with a “local-first” approach. The India fund was launched in 2000 and the China-based fund in 2005. Each business will become fully independent by March 31, 2024.

Illustration: Dom Guzman