WhatsApp Backer Sequoia Said to Reap $3.5 Billion in Deal

Sequoia Capital, the only venture investor in WhatsApp Inc., stands to make about $3.5 billion on its investment in the mobile messaging service that Facebook (FB) Inc. agreed to buy for as much as $19 billion in the biggest Internet deal in more than a decade.

Sequoia, which backed some of Silicon Valley’s top companies since it was founded in 1972, paid about $8 million for a stake of more than 15 percent in 2011, according to a person with knowledge of the deal. The holding is valued at about $3.5 billion after Facebook offered as much as $19 billion for the company, said the people, who asked not to be identified because details of the investment are private.

The purchase would be the biggest Internet deal since the $124 billion AOL Inc.-Time Warner merger in 2001 and allow Sequoia to reel in more cash following a year in which it returned about $3 billion to investors. The firm, based in Menlo Park, California, was an early investor in Apple Inc., Yahoo! Inc. and Google Inc., the biggest venture-backed initial public offering until Facebook’s 2012 IPO.

Sequoia said in a blog post today that WhatsApp co-founders Jan Koum and Brian Acton have created the “communications backbone” of the Internet.

‘Clean, Fast’

“As competitors promoted games and rushed to build platforms, Jan and Brian remained devoted to a clean, lightning fast communications service that works flawlessly,” Jim Goetz, who led the investment for Sequoia, wrote in the post.

Andrew Kovacs, a spokesman for Sequoia, declined to comment on the firm’s stake. A representative for WhatsApp didn’t immediately respond to a request for comment.

Facebook’s purchase of WhatsApp includes $12 billion in stock, $4 billion in cash and $3 billion in restricted shares. WhatsApp has more than 450 million members, with 1 million being added daily, who use the service to send messages over the Web.

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net; Pui-Wing Tam at ptam13@bloomberg.net

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