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Sequoia to invest in China?

Updated

china2.jpgSequoia Capital, the well-known Silicon Valley venture capital that backed Cisco, Yahoo, Google and others, has reportedly raised a $200 million China fund -- a significant development for the firm that has long focused mainly on the U.S. and whose former leader has publicly dismissed China as being in the midst of a huge bubble.

We haven't confirmed it 100 percent yet, but we've got a source telling us this. Sequoia is famous for not responding to press inquiries, so we're unlikely to get any confirmation from them. But Sequoia's leader Mike Moritz was in Israel on Thursday, and an interview was published today in TheMarker.com, in which we're told he said Sequoia will soon announce the fund. Sorry, no English language translation as yet. Sequoia held a meeting with...

...its investors in NY on Tuesday.

It is true that Sequoia has invested in Israel, but that had seemed and exception and safe, considering the deep ties the U.S. has had with Israel for decades and that many firms have investments there. Sequoia has an office in Herzlia, and recently raised about $185.7 million for its third Israeli fund.

But as we reported recently, Skype is one more example underscoring how it is time Silicon Valley firms step out of their relative cocoon here. We noted the hiring last month by Sequoia of Neil Shen. But still, the move is in marked contrast to the dismissal just last year by Sequoia's erstwhile leader, Don Valentine -- and which is why we await confirmation before we fully believe it.

Check out what we reported a year ago on Valentine's comments about China:

...Valentine did go on the SV Bank trip to China, but the experience only confirmed his view that Sequoia should stay away from direct investments there, he said. Indeed, Valentine ragged on China all evening long. Summing up his views about the rush by others to invest China, he quoted the title of a song from 1950's jazz singer, Billy Eckstine: "Fools rush in where angels fear to tread." He continued: "China has no laws, no accounting system, bankruptcy banks, and according to Fortune, a stock market that is made up of a den of thieves no different from the ones on Wall Street."

Valentine said Sequoia hasn't invested abroad in its 30-plus year history, and it's unlikely to begin doing so. Even investing in a Boston company is a big deal for Sequoia, he said, and most of our investments are not only west of the Mississippi, they're west of the California border, he said. Concluding with a bang, Valentine prophesied about China: "You're about to see a bubble burst in the next five years, or sooner, that will make our bubble look meaningless."

Kind of sounds like Valentine's warning to his firm's partners back in 1999, when they raised a fund to invest in pre-IPO companies at the top of the bubble, doesn't it? And they lost their shirts. (See the link to our 2001 story at the bottom of this entry).

But if it's true, how long it will be before Kleiner Perkins -- another Silicon Valley firm that remained focused on Silicon Valley -- announces a China initiative? And you can bet that there will be scores of other firms that then follow. We remember talking with retired Kleiner partner Tom Perkins a couple of years ago, who told of how he'd prodded his colleagues at Kleiner to think about international expansion, but that they'd shrugged it off. We'll see what happens this time.

Update: See comment below. Says Sequoia has hired Fan Zhang, a former director of DFJ's China operations. He's been pretty active, and if he's any reason why DFJ got access to the Baidu blockbuster, no wonder Sequoia has gone after him. Another juicy little personnel battle in China? (We found an bio here on DFJ's ePlanet Ventures Web site for Zhang, though it isn't linked to from the main page.)


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Comments

they also hired te head of china for dfj..zhang fan. this fund is happening

china on September 18, 2005 10:50 AM
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You should have also translated TheMarker's headline:

Mike Moritz: "I believe today even a chimpanzee could raise $100M for a venture capital fund".

Daniel Dreymann on September 18, 2005 4:05 PM
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Matt, The sooner you move to China, the better I think it will be, as this is where the next Sand Hill Road is :)

Shak on September 18, 2005 8:32 PM
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So what's new?

Businessworld, a leading business weekly in India, has reported that Sequoia Capital and Bangalore-based WestBridge Capital are to acquire a 15% stake each in Mumbai-based Times Internet Limited, the online services arm of the Times of India group of publications. "The combine is expected to pay $36-40 million for the stake in the portal (Indiatimes.com) owned by the Rs 1,808-crore Bennett, Coleman & Co." the report says. Check out the full report at http://www.businessworldindia.com/AUG1505/news03.asp

The deal will mark Sequoia's second investment an India-based company following its $20 million investment in Bangalore-based BPO services firm 24/7 Customer way back in July 2003. (More than 90% of 24/7 Customer's people work out of India. Just a handful of marketing folks based out of the US, even though it is technically headquartered there.)

Arun Natarajan on September 19, 2005 3:51 AM
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Arun,

Thanks for reminding me of Sequoia's investments from India. Until now, they've been managed mainly from here -- will be interesting to see if they start investing directly there.

And Shak,

I'll think about it. Btw, can't wait to read the account of your third Saturday night -- you still hung over? Good stuff on Chinawhite.net. Keep it coming.

Matt Marshall on September 19, 2005 6:26 AM
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Thanks for that information,besides I have found an
internet company, http://www.chinavestor.com

They cover all U.S. listed Chinese companies, weekly stock recommendation, portolios, Newsletter to eduate audiance etc. Anyway, this is a 101 for individuals interested in investing in China. CHeck them out, great source of information.

michael

michael on December 5, 2005 6:49 PM
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I know Sequoia Capital invest in high tech, but do they invest in high tech Automotive start ups?

Daryl Brownlee on February 23, 2006 11:47 AM
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Can't speak for Sequoia, but my hunch, based on observation of the firm and talking with them a few times, is that yes, as long as you're talking a possible market size of several hundred million dollars.

Matt Marshall on February 23, 2006 12:28 PM
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