Nearly a year ago to the day, the 50-year-old investing powerhouse Sequoia capital announced that it had reorganized itself around a unique, permanent structure: the Sequoia Capital Fund.
Now, thanks to one SEC form filed on Friday, we know how much is in the fund: $13.6 billion.
The number represents two things: the value of the stocks that Sequoia rolled out of its old funds into its permanent fund — which are shares in now-public companies that Sequoia backed as startups, including Airbnb, DoorDash, Unity, and Snowflake. Some of those shares are owned by Sequoia; some are owned by the company’s limited partners, who have agreed to allow Sequoia to continue to manage the shares on their behalf.
The $13.6 billion also represents new capital commitments that will be received later called down and invested in more traditional funds that sit below Sequoia’s permanent fund, such as a $195 million seed fund announced last month. The idea is that the money should be invested in startups that eventually go public and whose shares in the Sequoia Capital Fund end up in a kind of long, lucrative cycle.
Not all of the shares of every portfolio company end up being swept into the fund; Sequoia says instead that the permanent fund for a “selection of our enduringFor example, when Sequoia’s portfolio company Stripe eventually goes public, instead of distributing Stripe’s stock to its investors, Sequoia — assuming it has the blessing of its limited partners — will be more likely to sell the stock of the company. esteemed company from the many different vehicles it has used to support Stripe in its Sequoia Capital Fund with the expectation that those shares will continue to appreciate in value.
Sequoia’s strategy – implemented in late fall 2021, although announced last year – has drawn quite a bit of criticism.
One of the company’s limited partners told this editor last month that his institution would have preferred to outsource distributions, but agreed with Sequoia’s long-term strategy of preserving the relationship with the company. Meanwhile, industry observers have noted that if Sequoia had distributed shares of many of its top-performing companies in 2021, instead of holding onto them as the market soured last spring, it would have produced much higher yields for its limited partners.
The company insists it has no regrets. During a sit-down last month, longtime Sequoia partner Alfred Lin said that even if Sequoia could turn back the clock to late 2021, it wouldn’t do anything else. “We are long-term investors,” he said, adding that the “only question we ask is whether [we] think these companies will be worth more in 10 years than they are today – not a short term of three months, a month or a year.
The companies that Sequoia has put into the Sequoia Fund, Lin said, “are building for the long haul. . . and if you believe in the long run, one of the best benefits [in] holding is something called temporary arbitrage. You just arbitrate people’s nerves because they don’t like to see volatility.
A Sequoia spokesperson declined to comment on this story, but limited partners are locked up until the end of this year, according to a source close to the company. Indeed, presumably to ensure some stability from the start, Sequoia banned redemptions from the Sequoia Capital Fund for the first two years. this through a combination of shares and cash.
In the meantime, it’s not clear how much of that $13.6 billion is tied up in equity versus comes from new capital commitments, which are earmarked for certain sub-funds of Sequoia with each investor’s blessing. But if history is any indication, an even more interesting number will soon be revealed.
Because Sequoia restructured as a registered investment advisor when it established its permanent fund, it is now required to file an annual form called an ADV that specifies investment style, assets under management and key executives.
This form was last submitted on March 31 of last year and showed that Sequoia had a staggering $85 billion under management as of 12/31/21. Because it is required to be filed annually, Sequoia will soon be sharing the latest news about its assets under management.