11 January, 2022
Sequoia breaking from the VC model to hold public stocks longer

Sequoia Capital is creating a new structure in which the 10-year fund cycle for returning capital to outside investors is eliminated and it can hold on to public companies longer to benefit more from after the companies go public.

The new fund structure consists of two interconnected parts. The first, dubbed the Sequoia Fund, is an open-ended portfolio of publicly-traded companies. The second is a group of sub-funds, each of which is aimed at strategies such as seed, venture and growth. Sequoia sees the main fund and the sub-funds as symbiotic. The Silicon Valley firm will sell positions in public companies and use the proceeds to invest in the sub-funds. In turn, proceeds from the sub-funds will finance the Sequoia Fund.

With this move Sequoia is abandoning the 10-year venture fund, in which limited partners, the outside investors that contribute to the fund, expect to get paid back over a decade. The new Sequoia Fund, will raise money from LPs and then funnel that capital down to a series of smaller funds that invest by stage. Proceeds from those funds will feed back into the Sequoia Fund. With no time horizon, Sequoia can hold public stock for longer stretches, rather than distributing those shares to LPs.

The traditional venture model has been dying a slow death for the past decade or so, as investors from across the globe and all walks of life have poured into the seemingly never-ending bull market.