Is Sequoia's new fund model a VC watershed moment?

Read online | Don't want to receive these emails? Manage your subscription.

PitchBook

Log in

The Weekend Pitch

October 31, 2021

Presented by Masterworks

(Bernhard_Staehli/Getty Images)

The VC industry appeared to reach something of a watershed moment this week when Sequoia fundamentally restructured its vast portfolio into a single master fund.

Put simply, Sequoia plans to gather up all its fund commitments for its US and European vehicles and decant them into the newly minted Sequoia Fund, which will act as an LP and redistribute capital into its traditional venture funds while simultaneously holding onto companies after they go public.

With the announcement, Sequoia declared that as far as its business is concerned, the venture industry's standard 10-year fund cycle is "obsolete." It's an innovative move for sure, and one that is perhaps overdue. But while it may help solve some problems, it could also be creating new ones. I'm Andrew Woodman and this is The Weekend Pitch. You can reach me via andrew.woodman@pitchbook.com or on Twitter at @adwoodman.

The new model tackles a number of issues for Sequoia. The big one is flexibility. The firm can now hold onto its most valuable portfolio investments for longer in the hope of realizing bigger returns at a later date. Meanwhile, investors won't be tied down with multiyear commitments, and will instead be investing into an open-ended portfolio. It's a win-win situation, or so it would seem.

Quote/Unquote

"Many of these firms don't care if they own 3% or 12% of the company at the seed stage. They just want to make sure that they have an inside lane to put more money into these companies at later stages."

—John Vrionis, co-founder and managing partner at seed-focused firm Unusual Ventures.

Rounds beyond Series A are getting more competitive, helping the highly fragmented seed market attract multistage firms such as Greylock Partners and Andreessen Horowitz who want to secure less expensive stakes in promising startups as early as possible. However, seed firms may have reason to be skeptical about the increased interest.

Datapoints

Outsized VC funds have dominated the US fundraising landscape in 2021, pushing the total capital raised across the $100 billion mark for the first time.

Tiger Global and Andreessen Horowitz have added to a long string of mega-funds in recent days. And last week, Lightspeed announced plans to raise over $5.5 billion across three vehicles covering early- and late-stage deals, The Information reported.

Deal Flow

In the first three quarters of 2021, global ridehailing companies raised $7.4 billion from VCs, up 1.8% compared to the same period in 2020. There's a strong appetite among VC investors to back business models consisting of fleet-owned electric vehicles, putting leading US ridehailing companies like Uber and Lyft—which don't own and operate EV fleets—at a disadvantage.

Our recent analyst note details how e-mobility services leveraging emerging technologies such as fleet management software, charging stations and battery storage could take over the current outsourced car and driver model.

Did you know ...

(Andriy Onufriyenko/Getty Images)

… That it's estimated that existing technologies can reduce up to 65% of emissions needed to reach net zero by 2050? For the remaining 35%, the climate tech industry is counting on breakthroughs such as hydrogen electrolysis from seawater or alternative-fuel and battery-powered aircraft.

Our latest installment of Emerging Tech Research includes a comprehensive market map of the climate tech landscape, tracks data on dealmaking and exits, and puts a spotlight on several companies that provide new opportunities in the space.

Recommended reads

As Gen Z comes to represent more and more of today's workforce, generational frictions are emerging. How one age group's weird can quickly become the new normal. [The New York Times]

Remote learning during the pandemic has resulted in apps that track everything students (and often parents) do online. [Bloomberg]

Retail brokerages continue to attract day traders with their appealing apps, but regulators are worried that people are taking on risks they don't understand. [Financial Times]

How climate change and human decisions about forest management are changing the very color of fall foliage. [Fast Company]

Despite losing market share, smaller boutique and specialist asset managers are continuing their battle against mega-firms. [Institutional Investor]

Crypto lending is a fast-growing field. Will regulators be able to keep up? [Protocol]

This edition of The Weekend Pitch was written by Andrew Woodman and Priyamvada Mathur. It was edited by Alexander Davis, Angela Sams and Sam Steele.

Were you forwarded The Weekend Pitch? Sign up at pitchbook.com/subscribe.

Since yesterday, the PitchBook Platform added:

2

VC valuations

27

People

1

Companies

See what our data software can do

About PitchBook | Terms of use | Advertise with us | Contact

This email was sent to you via the PitchBook Platform.

Do you want to change your email address, get a different edition or unsubscribe? Manage your subscription here.

Is Sequoia's new fund model a VC watershed moment?

Quote/Unquote

Datapoints

Deal Flow

Did you know ...

Recommended reads

Older messages

COP26 and the climate finance bubble

Lightspeed eyes piece of VC fundraising record

Global M&A nears new milestones

Mapping the climate tech landscape

An electric future for ridehailing

You Might Also Like

🆕 New Year, New Biz: Choose what to sell

♦️ How the clash between business and customer goals kills brands

🤑He Made $9K with Public Domain Books on Amazon

In 3 Days, Utopia 4.0 Goes Live

SEO Mistakes That Could Lead to an Indexing Nightmare 😨

2024’s top brands who stole the show on social

ET: January 14th 2025

The Most Important Data Point For Investors

The Most Important Data Point For Investors

How to Win Readers Over Plus InboxRead's 2024 Report