Sequoia has triplets

Sequoia Capital surprised its LPs Tuesday, announcing that it would split into three separate firms serving China, India/Southeast Asia and the US/Europe.

Sequoia China will adopt the name HongShan and be led by Neil Shen; Sequoia India/SEA will become Peak XV Partners and headed up by Shailendra Singh; and the firm’s US/Europe operations will continue to be known as Sequoia Capital and led by Roelof Botha.

In a memo to LPs that it posted on Twitter, Sequoia wrote, “We will move to completely independent partnerships and become distinct firms with separate brands no later than March 31, 2024.”

An LP who asked not to be named said Sequoia had not telegraphed the move, and it “may have caught some people by surprise.” The LP said they didn’t believe the new structure would change much in how they work with the firm, but also said they aren’t completely sure about what it all means. “We just need to learn more,” the LP said.

Sequoia said in the LP memo that it will host a call with investors “in the coming days.”

It doesn’t appear that LPs will have to untangle their investments in various Sequoia funds, despite Botha announcing in a blog post in October 2021 that the firm was adopting a “single fund structure” to be called The Sequoia Capital Fund. The LP who spoke to VCJ said that they believed that structure applied only to Sequoia’s US and European funds. The LP has invested in Sequoia’s China funds and is of the understanding that they “operate independently” from the US business.

Sequoia said it is making the move because, “It has become increasingly complex to run a decentralized investment business. For example, each business has evolved to meet opportunities in their markets across a wide variety of sectors… This has made using centralized back-office functions more of a hindrance than an advantage. Additionally, as each entity’s portfolio has expanded to include companies that are becoming global leaders, we’ve seen growing market confusion due to the shared Sequoia brand as well as portfolio conflicts across entities.”

Forbes spoke with Botha, Shen and Singh, noting, “the decision to split up Sequoia’s global brand was a gradual discussion that intensified over the last several months. They cited conflict between the funds’ respective start-up portfolios, brand confusion as they diverged in strategies and increasing complexity of maintaining centralized regulatory compliance as factors – while acknowledging, but attempting to downplay – a frostier geopolitical environment.”

Botha told Forbes, “Things seemed to be going in a direction where it gets harder, not easier. This isn’t a retreat saying, ‘white flag, we failed.’ It’s more of a victory in the sense that we have these fully independent businesses that can go even further.”