The University of California has seen cash distributions from Sequoia Capital and Kleiner Perkins Caufield & Byers decline over the past eight years, as dot-com era investments apparently haven’t been able to match the spectacular returns from earlier funds, according to an analysis of data provided by the university system.
Thomson Reuters (publisher of VCJ and online affiliate peHUB.com) sought performance data for the funds after learning that the University of California Board of Regents had not published updated returns for individual Sequoia, Kleiner Perkins and Accel Partners funds since 2003, which may be a violation of state law. The university regularly publishes return data for more than 60 other funds in its venture portfolio.
In response to Thomson Reuters’ request, the Board of Regents said that it had not received individual fund performance data since 2003 from Kleiner and Sequoia. It chose to release minimal “aggregate” performance data for the 10 Kleiner funds and 10 Sequoia funds in its portfolio.
The board disclosed aggregate drawdowns, distributions and net asset value as of Dec. 31 for both Kleiner and Sequoia. It also provided those three data points for a single Accel fund in its portfolio.
The aggregate data show that the University of California invested about $262 million in 20 funds from Sequoia and Kleiner over the past two decades and received about $1.87 billion in distributions, for a 7.1x return.
However, the majority of the distributions—$1.45 billion or 78%—came prior to 2004 and primarily from a handful of blockbuster funds from the early and mid-1990s, according to an analysis of the aggregate data and data released by the university in 2003. In the past eight years, the LP has received $411 million in combined distributions from Kleiner and Sequoia—suggesting returns between 3x and 4x during that period, according to the analysis.
The Regents’ only Accel Partners holding—Accel VIII, a vintage 2000 fund—has not fully returned the Regents’ investment. Accel called down $11.7 million from the Regents, but has made distributions totaling $11.1 million. Fund VIII had a net asset value of $3.1 million as of December, according to the Regents.
The analysis shows that Kleiner has returned more capital to the University of California than Sequoia over the past 20 years, but that Sequoia has returned more capital than Kleiner in the past eight years.
The Board of Regents has invested $133.4 million with Sequoia in the past 20 years and has received $739 million in distributions. As of 2003, 10 Sequoia funds had generated cash returns of $465.6 million, which means those funds have generated $273.3 million since then.
Overall, the Board of Regents has seen a return of about 5.5x from its Sequoia investments. That could improve, as the board says the Sequoia funds still have a net asset value of $37 million.
The analysis shows that the university system got its biggest Sequoia returns from Sequoia Capital VI, vintage 1992, and Sequoia Capital VII, vintage 1995. Those two funds distributed a combined $329 million in cash and boasted IRRs of 110.4% and 174.5%, respectively, as of 2003, according to the Board of Regents.
Without seeing fund-level return data, it’s impossible to know exactly which of Sequoia’s funds produced the additional $273.3 million in distributions over the past 10 years. If one assumes that vintage 1992 and 1995 funds produced the bulk of their returns by 2003, then the distributions made since that time likely came from four Sequoia funds, two of which were created in 1998 and two in 2000. Those funds are Sequoia Capital VIII, Sequoia Capital IX, Sequoia Capital X and Sequoia Capital Franchise Fund.
As of 2003, the four funds had distributed $49.7 million in cash, $34 million of which came from Sequoia VIII. If the four funds produced the $273.3 million in post-2003 distributions, then their total distributions would be $323 million. That would mean those four founds produced a 3.84x return on the $84 million that the Board of Regents said it committed to them as of 2003. It isn’t clear how much of the capital was distributed by Sequoia Capital VIII (vintage 1998), which backed Google, a wildly successful investment for both Sequoia and Kleiner.
The aggregate data also paint a flattering picture of Kleiner. The partnership made distributions totaling $1.126 billion to the Regents over two decades on investments totaling $128 million. That’s an 8.8x return, and it could grow since the Kleiner portfolio still has a net asset value of $19 million.
It is notable that Kleiner had already returned close to $1 billion ($988.9 million) as of 2003. The big winners from that period were KPCB VII, vintage 1994, and KPCB VIII, vintage 1996, which together returned $813 million.
That means the Kleiner portfolio has distributed just $137.1 million in the past eight years. Assuming those distributions came from KPCB 1X-A, vintage 1999, and KPCB X-A, vintage 2000, those two funds would have returned about 3.4x return on the Board of Regents’ investment of $40 million (for both funds combined). That return is less than half of the overall return for Kleiner’s 10 funds as a whole.
Kleiner and the Board of Regents did not respond to interview requests. Sequoia declined to comment.