Sequoia Capital, one of the world’s oldest and most successful venture capital firms, is forming a single fund to hold all of its U.S. and European investments, including stakes in publicly-traded companies, Axios has learned.
Venture capital is the money of innovation, but the industry itself rarely innovates. This is a radical exception.
“We think the VC model is outdated,” Sequoia partner Roelof Botha explains. “It creates an odd dynamic between us and founders, where on the eve of an IPO they’re asking if we’re going to have to get off their boards and quickly distribute the stock. Why should that be the default, particularly when so much value creation happens later?”
The Sequoia Fund will serve as an open-ended capital vehicle; the sole limited partner for all future Sequoia “sub-funds” (seed, venture, growth, etc.). Sub-fund managers will decide on when to contribute assets into The Sequoia Fund, optimizing for their own return profiles.
Limited partners will keep accounts with the Sequoia Fund, with annual redemption rights, and make allocation requests to sub-funds out of those account balances. In other words, the closed-end funds and the open-ended fund will continuously feed each other.
Sub-funds will maintain Sequoia’s premium fee structure, including a 30% carried interest, while The Sequoia Fund will have a <1% management fee and a long-term performance fee with what I’m told is “a very high hurdle.”
