Sameer K. Gandhi
Michael L. Goguen
Mark D. Kvamme
Pierre R. Lamond
Douglas M. Leone
Thomas M. Stephenson
Mark A. Stevens
Donald T. Valentine
Mr. Erik Lundberg, CFA
Chief Investment Officer
University of Michigan
101 North Main Street – Suite 525
Ann Arbor, Michigan 48104 – 5517
July 24, 2003
Re: Sequoia Capital XI, a Delaware Limited Partnership
This is the letter that we had long hoped we would not need to write. Yet I am afraid we have concluded with great regret that we must remove the University of Michigan from Sequoia Capital XI and would request that you use your best efforts to sell all of the University’s positions in other Sequoia Capital Partnerships. As you know we are very concerned that the University will release confidential Sequoia Capital information to parties who have requested it under the Michigan Freedom of Information Act.
We have very much valued our relationship with the University of Michigan since it began in 1993. We have always felt that you and your staff have treated us in a fair and equitable fashion. We hope that you feel we have delivered on our promises to you and helped, in a small way, make the University a better place for all its students and professors. By our calculation the investments made by the University of Michigan in Sequoia Capital’s more mature early stage investment partnerships – Sequoia Capital VI, VII and VIII – have yielded a return of $125 million on an investment of $14 million. These have been produced by our investments in companies such as nVidia, Documentum, Yahoo! and Network Appliance.
I know that you are also aware of how much we value long-term business relationships whether it is with entrepreneurs we finance, companies we help organize or limited partners. We are fortunate enough to work on behalf of Limited Partners whose work promotes educational activities or other worthy philanthropic endeavors. So it is with a real sense of sadness that we dispatch this letter.
Unfortunately times have changed and the quiet curtain of privacy that protected our confidential information has been torn. Our first impulse, when the requests for information first arrived was to hope that they would peter out. Yet they haven’t and there doesn’t seem to be any chance that they will do so anytime soon. Neither you nor we know where and when these requests for information will end. We are also painfully aware of your predicament as the Chief Investment Officer of a public university that needs to answer to multiple constituencies including people who hope to profit from the sale of data about the venture capital business or newspapers interested in publishing articles about our business. That is clearly their right. Yet we also have the right to protect our other clients, our portfolio companies and ourselves from the various damages that can result from the dissemination of information we consider highly confidential. We intend to remain as accountable to our clients as we have been in the past. But we do not believe their interests will be served by regular disclosure of sensitive confidential information that can be misleading or subject to grotesque misrepresentation. The venture capital business – unlike other segments of the investment universe such as publicly traded stocks or bonds – does not lend itself to precise quarterly measurements.
Of course, laws may change. All of us at Sequoia Capital hope there will come a time when we can once again welcome the University of Michigan as a Limited Partner. We hope that it will come sooner rather than later and we would relish the opportunity to once again help make the University a better place for coming generations of students.
Effective immediately, the University of Michigan is a “Withdrawn Limited Partner” under the Sequoia Capital XI Limited Partnership Agreement. Melinda Dunn, our CFO, will be contacting you with details regarding the redemption and termination of the University’s interest.
SC XI Management, LLC
cc:Jonathan Axelrad, Esq.
(Wilson Sonsini Goodrich & Rosati)