The Sequoia Fund: Affected person Capital for Building Enduring Companies
By Roelof Botha for Crew Sequoia
The creative spirits. The underdogs. The resolute. The self reliant thinkers. The warring parties and the greatest believers. This ethos describes the founders we associate with, apart from Sequoia’s relentless force to again them be successful.
Since 1972 we’ve had a front row seat as visionary enterprise and abilities leaders pushed the limits of the doable. And it’s staunch the foundation.
Mockingly, innovations in venture capital haven’t saved tempo with the corporations we again. Our industry is still beholden to a rigid 10-year fund cycle pioneered in the 1970s. As chips shrank and machine flew to the cloud, venture capital saved operating on the enterprise equal of floppy disks. Once upon a time the 10-year fund cycle made sense. But the assumptions it’s according to out a longer defend correct, curbing meaningful relationships prematurely and misaligning corporations and their funding companions.
The ideal founders choose on to perform a lasting affect on the planet. Their ambition isn’t confined to a 10-year duration. Neither is ours.
Our journey with class-defining corporations — Apple, Google, Cisco, Team spirit, Snowflake, Zoom — has taught us that they possess close higher than about a years to discover. In most traditional years, many of our most promising corporations bear chosen to defend private longer, constructing scale and extending their strategic footprint sooner than debuting as public market leaders. They then compound their advantage for decades, with mighty of their imprint accruing long after an IPO. Sq., for event, which we partnered with early in 2011 and where I stay on the board of administrators, had a market capitalization of $2.9B on the IPO in 2015. 5 years later Sq. grew to $86B, and as of late is price over $117B. “As a founder, the thought and belief we’ve built with Sequoia and Roelof over a long time are irreplaceable,” says Jack Dorsey of Sq.. “That history and relationship has been valuable to me at defining moments.”
Patience and long-timeframe partnerships generate distinctive results. For Sequoia, the 10-year fund cycle has turn into musty.
Over the years, we’ve reinvented ourselves in our quest to opinion outlier founders. We followed abilities innovation spherical the area as we expanded from Silicon Valley into China, India, South-East Asia and Europe. We developed the industry’s first Scouts program over a decade ago. And we’ve launched initiatives to again founders be successful, from recruiting and customer roundtables to firm accomplish and community programs.
We are able to achieve more. This day, we’re enraged to instruct our boldest innovation but to again founders discover enduring corporations for the 21st century.
In our U.S./Europe enterprise, we’re breaking with the humble group according to fund cycles and restructuring Sequoia Capital spherical a unique, permanent enhance: The Sequoia Fund.
Attractive forward, our LPs will invest into The Sequoia Fund, an launch-ended liquid portfolio made up of public positions in a range of our enduring corporations. The Sequoia Fund will in flip allocate capital to a series of closed-end sub funds for venture investments at every stage from inception to IPO. Proceeds from these venture investments will hump abet into The Sequoia Fund in a valid solutions loop. Investments will no longer bear “expiration dates.” Our sole focal point will be to develop imprint for our corporations and restricted companions over the long term.
This recent enhance eliminates all man made time horizons on how long we are able to associate with corporations. It permits us to elevate close part on their boards and again them tag their doable over the course of decades. Enduring engagement with our legendary corporations will be Sequoia’s hallmark.
It also lets us defend public shares long after the IPO and seek the handiest long-timeframe returns for our restricted companions, the majority of which scramble to nonprofits and endowments. For simply about five decades, we bear now delivered unparalleled efficiency to our restricted companions, with capital distributions meaningfully outpacing capital calls. That foundation and our tune file of finding and serving to discover class winners has earned us their self perception to elevate close this dauntless step.
As phase of this commerce, we’re also changing staunch into a registered funding adviser. This expands our flexibility to toughen our portfolio corporations thru diversified financing occasions, equivalent to secondaries or IPOs. It also permits us to extra perform higher our investments in rising asset courses equivalent to cryptocurrencies and seed investing programs.
That is a elementary disruption to the venture capital model. We regularly declare with our founders about crucible moments — the uncommon, dauntless choices that form their future. That is a crucible 2d for Sequoia. For the first time, this enhance methodology Sequoia’s partnerships would possibly perhaps additionally very neatly be every bit as enduring because the corporations we work with. This switch lets us foster deeper relationships with the significant drivers of innovation and cost creation — our founders and their corporations. We defend up for constructing lasting imprint with them as they tag the plump scale of their ambition.
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Disclaimer:
The data contained herein has been willing by Sequoia Capital Operations, LLC (alongside with any friends, “Sequoia”) and is being equipped to you for informational functions as background on Sequoia’s most traditional funding actions. That will not be any longer an provide to put money into any fund (“Fund”) managed by Sequoia. Any provides will be made greatest via a confidential private placement memorandum which would possibly include principal likelihood factors and concerns that must still be fastidiously evaluated sooner than investing in the acceptable Fund. Any resolution to put money into any Fund must still be essentially based completely upon the guidelines position forth in the acceptable confidential private placement memorandum.
The data herein is given in summary sort and does no longer purport to be complete. Investors must still take note that the post-IPO efficiency of the portfolio corporations talked about herein will not be any longer indicative of the outcomes which had been done by varied Sequoia portfolio corporations. Please also point to that the examples herein are illustrative and build no longer reflect efficiency of the Funds as a complete.