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Sequoia is divided into three entities – Sequoia Capital in the US and Europe, Peak XV Partners in India and Southeast Asia, and Hongshan in China – as the well-known firm seeks to assess the growing complexity of running a decentralized operation.
The split – which will take effect by March next year – comes amid growing geopolitical tension between China and the United States, the world’s two largest economies. The India and Southeast Asian unit also faced some optics and governance issues in its portfolio companies.
Sequoia underestimated why it split. “It is becoming increasingly complex to run a global, decentralized investment business. For example, each company has evolved to cater to opportunities in their markets across a broad range of sectors,” the company said in a post co-authored by regional heads Roelof Botha, Neil Chen and Shailendra Singh.
“This has made the use of centralized back-office functionality more of a drawback than an advantage. In addition, as each entity’s portfolio has expanded to include companies that have become world leaders, we have seen increasing market confusion due to the shared Sequoia brand as well as portfolio inconsistency across entities.”
Sequoia’s decision to restructure its international subsidiaries into standalone units could, however, prompt rival venture firms to follow suit over the next year.
The sudden announcement comes after an increasingly difficult period for US venture capital funds investing in China. It was the Biden administration work on software To restrict the flow of US dollars into China, Sequoia has played a large role in fueling the country’s consumer internet sector for two decades.
The strategy is seen as a way to hinder China in its development of technologies important to national security, such as artificial intelligence, quantum computing and semiconductors. At the G7 summit in late April, it was President Biden Seek support from allied nations To support his plans to limit foreign investment in China.
Sequoia Capital China has already slowed its pace in China significantly. The company raised a whopping $9 billion last July, but concluded only 62 deals between the third quarter of 2022 and the second quarter of 2023, compared to 177 deals between the third quarter of 2021 and the second quarter of 2022, according to Crunchbase.
Sequoia Capital China is likely to take a more cautious approach to investing in China amid the changing political and economic landscape. There are other factors that slow down its activity. Most US dollar venture capital funds have scaled back their investments since the country launched a massive regulatory crackdown on the consumer internet industry some three years ago. Venture capital around the world is also more conservative amid the global economic slowdown.
It remains to be seen how the Biden administration’s policies will affect US venture capital investment in China. With a new brand and independent operations, HongShan will face the challenge of competing with domestic venture capital firms in China in the new era, where growth in the technology sector will favor consumers’ Internet deep technology.
For Peak XV Partners, which under its former brand name has raised $9.2 billion across 13 funds and invested in more than 400 startups in the region, it will be looking to put to work the roughly $2.5 billion it raised last year, the India and SEA unit said.
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