Sequoia Capital to Establish $8B Global Fund, Target Chinese Investors

iMarkets reported on January 31 that Sequoia Capital, which has invested in Google and Apple, plans to raise an $8 billion venture capital fund to support Chinese investors.

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Most funds will be used to invest in startups in their early phase, growth phase and Pre-IPO phase. The valuations of many start-ups soared, mainly driven by the listing of Vision Fund. Vision Fund raised $93 billion in venture capital, mainly from Softbank.

“There is too much money now, especially in the tech industry,” said a Hong Kong-based investment banker familiar with Sequoia, “You need a bigger strategic plan.”

This new global fund has attracted Chinese investors. Like other wealth management companies, insurance companies in China, and major Chinese institutional investors, they are committed to looking for alternative assets to boost returns.

Neil Shen, the founder and executive partner of Sequoia Capital China, is reportedly trying to find potential investors for the fund, which includes the government.

Another person familiar with the matter said the money may not be that high, and would be about $5 billion to $6 billion.

Sequoia has declined to comment on the funding. According to sources, Sequoia capital raised $2 billion in 2016 to fund the Global Growth Fund.

But as the investment cycle lengthens, venture capital and private-equity firms are scrambling for bigger cash pools. Many tech companies have opted to keep private holdings longer than usual, such as Uber, Alibaba’s Ant Financial and Airbnb. According to Preqin, the average value of investments late last year surged by 40 percent. The Softbank Vision Fund, the world’s largest private equity fund, has also helped push up start-up valuations.

Thomson Reuters data shows that since its founding in 2016, Softbank Vision Fund has invested more than $9 billion to the global start-ups, including $4.9 billion in shared office company WeWork, and $1.1 billion in Indian e-commerce platform Flipkart.

In addition, Sequoia also promotes investor in the Middle East and Japan to participate in the new global fund. It will continue to focus on technology, healthcare, consumer and media industries, especially those in the United States, China and India.

Sequoia China

Sequoia’s China branch, established in 2005, also raised up to 15 billion yuan ($2.37 billion).

Sequoia China declined to comment on Shen’s role in the latest global fund.

Sequoia has more than 300 portfolios in China, including Internet giant Alibaba, travel company Didi, and on-demand service provider Meituan.