Sequoia Capital, one of the world’s top venture capital (VC) firms, announced that it is abandoning the existing time-based model for investing, which it said has become obsolete, and restructuring the firm into a singular, permanent structure.
In a blog post, long-time Sequoia partner Roelof Botha said the firm’s future investment will all flow through The Sequoia Fund, an open-ended liquid portfolio made up of public positions in a selection of the firm’s enduring companies.
The Sequoia Fund will raise money from LPs and then funnel that capital down to a series of smaller funds that invest by stage. The restructuring, however, will focus on Sequoia’s US and Europe business. Sequoia Capital China and Sequoia India will not be part of the restructuring.
The Sequoia Fund will allocate capital to a series of closed-end sub-funds for venture investments at every stage from inception to IPO, with proceeds flowing back into the fund in a continuous loop.
With no time horizon, Sequoia can hold public stock for longer stretches, rather than distributing those shares to LPs
“This new structure removes all artificial time horizons on how long we can partner with companies. It enables us to participate on their boards and help them realize their potential over the course of decades,” said Botha.
The restructuring means Sequoia is abandoning the 10-year venture fund cycle pioneered in the 1970s. The traditional cycle means outside investors that contribute to the fund expect to get paid back over a decade.
“Once upon a time, the 10-year fund cycle made sense. But the assumptions it’s based on no longer hold true, curtailing meaningful relationships prematurely, and misaligning companies and their investment partners,” Botha said.
Additionally, Sequoia is filing with the US Securities and Exchange Commission to become a registered investment adviser, allowing it to invest in emerging asset classes such as cryptocurrencies and support its portfolio companies through various financing events, including secondaries or IPOs.
Sequoia, an early investor in global technology behemoths like Google and Apple, has partnered early and at every stage of growth with the founders of companies that now have an aggregate, public market value of over $3.3 trillion, according to its website.
In June, the firm announced raising over $5.1 billion across three growth funds. The biggest of the three is Sequoia Capital China Growth Fund VI, which attracted total capital commitments of nearly $2.8 billion.
The other two funds are Sequoia Capital US Growth Fund IX, which collected over $1.5 billion; and Sequoia Capital India Growth Fund III with $824.5 million in committed capital, show another two filings dated June 21 and June 17, respectively.