Nearly a year ago today, 50-year-old investment powerhouse Sequoia Capital announced a reorganization around its own permanent structure, the Sequoia Capital Fund.
Now we know how much money is left in the fund thanks to an SEC form filed on Friday. $13.6 billion.
This number does two things. The value of shares that Sequoia rolled back from the legacy fund to the permanent fund. These are shares of companies that are currently public that Sequoia has backed as startups, including Airbnb, DoorDash, Unity and Snowflake. A portion of these shares are owned by Sequoia. Some of them are owned by the company’s limited partners whom Sequoia has agreed to continue to manage the shares on their behalf.
The $13.6 billion also comes from new capital commitments that will later be called and invested in more traditional funds, such as the $195 million seed fund announced last month, which sits below Sequoia’s permanent fund. represents. The idea is that, if all goes well, the money will eventually be invested in a startup that goes public, and that stock will be invested in the Sequoia Capital Fund, creating a kind of long-term lucrative return cycle.
Not all portfolio company shares are ultimately swept into the fund. Sequoia said in a post last year that the perpetual fund is for “our permanent” business choices.
For example, if Sequoia’s portfolio company Stripe eventually went public, instead of, say, distributing shares in a payments company to investors, Sequoia would — assuming it had the support of a limited liability partner. With — you are more likely to move your Stripe shares out of the various vehicles you own. Previously, we invested Stripe in the Sequoia Capital Fund and hoped that these stocks would continue to appreciate in value.
Despite being announced last year, Sequoia’s strategy, implemented in late fall 2021, has received considerable criticism.
One of the company’s limited partners told this editor last month that his agency wanted to control the distribution, but agreed to Sequoia’s long-term holding strategy to maintain its relationship with the company. On the other hand, industry watchers say that if Sequoia had distributed stakes in a number of skyrocketing companies in 2021, rather than holding on to them when markets faltered last spring, it would have offered a much larger share to its limited partners. He points out that it would have been profitable.
The company claims it has no regrets. At a roundtable last month, Sequoia’s longtime partner Alfred Lin said that even if Sequoia could wind the clock back to his late 2021, nothing would change. “We are long-term investors,” he said, adding, “The only question we ask is [we] These companies believe they will be more valuable 10 years from now than they are in the short term of 3 months, 1 month or 1 year. “
According to Lin, the companies Sequoia has invested in the Sequoia Fund are “building for the long term . [in] Holding is what is called temporary arbitrage. People don’t like to see volatility, so you’re just arbitrage on people’s nerves. ”
A Sequoia spokeswoman declined to comment on the matter, but a source close to the company said the limited partners are in custody until the end of the year. Indeed, Sequoia prohibited redemptions from the Sequoia Capital Fund for the first two years, presumably to ensure initial stability, but going forward, should investors seek some liquidity from the Sequoia Capital Fund, Twice a year you will be given the opportunity to request funds. This is done through a combination of stock and cash.
In the meantime, how much of that $13.6 billion is tied to equity relative to what comes from new capital commitments to be allocated to certain Sequoia sub-funds with investor approval? It is not clear whether But more interesting numbers will soon emerge, if history shows.
Sequoia reorganized as a Registered Investment Advisor in creating a permanent fund, so it is required to submit an annual form called an ADV that specifies its investment style, assets under management and key directors.
The form was last filed on March 31st of last year and shows that as of December 31, 2021, Sequoia had a staggering $85 billion in assets under management. Due to the annual filing requirement, Sequoia will soon share updates on properties under management.
