Brand confusion, portfolio conflicts, complexity in compliance: Why Sequoia split in three

Venture capital giant Sequoia announced on Tuesday that it will split into three parts, resulting in Sequoia Capital for US and Europe, HongShan in China, and Peak XV Partners for India and Southeast Asia. This split is expected to be done no later than March 2024. The parts will be headed by Roelof Botha, Neil Shen and Shailendra Singh, respectively. 

Sequoia said in a statement that it became increasingly complex to run a decentralised global investment business, making the centralised back-office functions “more of a hindrance than an advantage”. 

Botha, Shen and Singh told Forbes in different interviews that the split was a gradual discussion over the past several months. They said conflict between the portfolios, brand confusion and complexity of maintaining centralised regulatory compliance as factors. 

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Giving examples of how companies in each portfolio have been in direct competition, Botha gave an example to the business site of a US-based company that complained to them saying that an India-based rival company – also backed by Sequoia – was telling prospective customers how they were the VC giant’s big bet in the category. 

In his interview, Singh gave yet another example of how a prominent US tech company complained to Sequoia about a Sequoia India investment it believed would become competitive in the future. The India team had already written their cheque a year ago. Eventually, Sequoia India cashed out without the US-company ever launching the rival tool. 

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According to Forbes, partners from one geography would not review potential deals by another’s. The shared back-office took care of compliance, finance, investor relations, basic infrastructure and an online portal. Investors in different regional funds overlapped but the regions had diverged, with investor relations becoming more localised and setting up their own software. With the split, partners will not invest in each other’s funds. 

Sequoia US has invested in companies such as Airbnb, DoorDash, WhatsApp and Zoom, while Sequoia China’s list boasts of Meituan, Alibaba, and ByteDance. Meanwhile, Sequoia India has companies such as Byju’s, Zomato and GoTo in its kitty. 

Also read: Sequoia Capital splits into three VC firms; India & Southeast Asia fund rebranded as Peak XV Partners

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