Sequoia Capital Targets New Global Mega-Fund at $8 Billion

Sequoia Capital, a Menlo Park-based private equity and venture capital firm, is reportedly looking to raise up to $8 billion for a new global fund, according to Reuters. The fund would mark the VC firm’s largest fundraising to date, as Sequoia particularly seeks backers from China, suggests the report.

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The Silicon Valley firm, which was an early investor in tech giants such as Google Inc. (now Alphabet Inc.) and Apple Inc., typically targets early and growth stage investments. It has backed companies that now control an approximate $1.4 trillion of the combined stock market value.

The new mound of cash would allow the firm to diversify its investments and get into pre-IPO funding rounds at an opportune time wherein startup valuations are on the rise. Massive new funds such as SoftBank Group Corp.’s $93 billion Vision Fund have provided a cash boost to the tech startup space in the recent period.

“There is so much money now (in the tech sector). You need to have a bigger war chest,” said a Hong Kong-based investment banker familiar with Sequoia’s strategic plans.

As companies decide to stay private longer, the average value of late-stage investments alone spiked 40% in 2017, according to data from Preqin. This trend for more drawn out investment cycles has pressured both VC and private equity firms to attract larger funding rounds.

The report indicated that Sequoia’s China founding partner Neil Shen is actively in discussions with potential Chinese investors, including state-backed ones for the mega-fund. The VC firm is also seeking investors in the Middle East and Japan, among other regions, for the fund. Sources noted that the fund could end up closing at $5 billion to $6 billion.

Sequoia, founded in 1972 and based out of Menlo Park, Calif., focuses on energy, financial, enterprise, healthcare, internet and mobile startups. In 2016, the firm raised $2 billion for a global growth fund, which stands as its biggest to date. Sources suggest that Sequoia will continue to focus on investments in the United States, China and India.

Sequoia’s China arm is also reportedly raising up to $2.37 billion for its fifth-yuan denominated fund to invest in local startups.