Sequoia Isn’t The First Hybrid | A Deep Tech Fund Raises $101,010,101 | A Startup Tackles Learning Disability Testing

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The VC Twitterverse, of course, had some thoughts. “I am surprised that more hasn’t been said about the fact that Sequoia Capital decided to become a hedge fund,” quipped Greycroft cofounder Ian Sigalow. Ho Nam, Altos Ventures cofounder and managing director, noted the non-news of the announcement. “It’s laughable to think that Sequoia just blew up the VC fund model,” he tweeted at the top of a well-considered Twitter thread that went on to explain that “the vast majority of VC funds don’t have tens of billions of profits tied up in public stocks (and they never have), so what Sequoia does here is not that relevant to the rest of the VC industry.”  Nam did go on to concede that he “loves the approach”  but that “sophisticated LPs” wouldn’t want this type of structure. 

Missing from most of the comments, however, is the acknowledgement that Sequoia isn’t the early exit prognerator. Several firms founded within the last few years are already doing this. Let’s meet them...

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The daughter of an engineering and computer science professor at the University of Missouri in Columbia, Zhuang could’ve ended up in academia herself: she earned her PhD at the University of California, Berkeley, also in CS. But writing papers felt a bit academic; attending classes at the Haas School of Business, she was moved by a talk given by Midas List billionaire Doug Leone. “I just went up to him afterwards and said, how do I get into this VC thing?” remembers Zhuang. “And he basically said, ‘apply to as many positions as possible.’ So yeah, I did that.”

 That’s how Zhuang found an analyst role at DFJ (now Threshold Ventures) in 2005, eventually moving to Shanghai to set up the firm’s office there. Zhuang took one more detour before committing her career to investing, spending about two years as a business development leader for a DFJ portfolio company in renewable plastics, Ecoplast. “Getting some hands-on sales experience made it just more real,” she says. “How do you actually sell the product? How do you build partnerships? On the investor side, you see all these projections, but sometimes you really have to dig behind the projections and see the assumptions.”

 The fund: Named after the escape velocity needed to leave Earth’s gravity (11.2 kilometers per second), 11.2 Capital was Zhuang’s answer to what she says she missed about VC: the constant exposure to new technology, especially in “deep tech” areas such as biology, healthcare and space. Back then – before some larger firms had established their own practices, such as Andreessen Horowitz (and recently, as Midas Touch readers will remember from last week, Y Combinator) — a first fund was a challenge; Zhuang held five different closes of tranches of capital through the middle of 2015, reaching $50 million. She made 34 investments from the fund, backing five unicorns and winners like self-driving car service Cruise Automation, biotech business Ginkgo Bioworks, which went public and carries a market cap north of $25 billion, and digital clinic Hinge Health, which reached a $6 billion valuation earlier this week.

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