Sequoia Capital is attempting to disrupt the venture capital fund model, restructuring its venture capital business into an open-end fund that, in turn, allocates capital to a series of closed-end subfunds, said Roelof Botha, a Sequoia partner, in a blog post.
"In our U.S./Europe business, we are breaking with the traditional organization based on fund cycles and restructuring Sequoia Capital around a singular, permanent structure: The Sequoia Fund," he said.
Mr. Botha said that for Sequoia, "the 10-year fund cycle has become obsolete" because it curtails meaningful relationships with portfolio companies prematurely and misaligns portfolio companies and their venture capital investment partners.
"This new structure removes all artificial time horizons on how long we can partner with companies," said Mr. Botha, who invests in seed, early stage and growth companies including Bird and Ethos, Sequoia's website shows. Proceeds from the venture capital investments will flow back into The Sequoia Fund "in a continuous feedback loop," he explained.
The Sequoia Fund will invest in the stock of some of Sequoia's now publicly listed former portfolio companies. It will invest capital in closed-end funds that will make venture capital investments in companies at every stage from inception to initial public offering, Mr. Botha said.
"Our sole focus will be to grow value for our companies and limited partners over the long run," he said. The majority of Sequoia's limited partners are non-profits and endowments and over 50 years, Sequoia's distributions to investors have "meaningfully" outpaced capital calls, earning Sequoia its LPs "confidence" to restructure its business, Mr. Botha said in the blog post.
Sequoia is also becoming a registered investment adviser, which will enable the firm to help portfolio companies through financing events such as an IPO as well as enable Sequoia to invest in cryptocurrencies and seed investing programs.
Mr. Botha could not be immediately reached seeking further information including fees charged by the new fund and its closed-end subfunds.
