Sequoia Capital Is Said to Explore $5 Billion Mega-Venture Fund

Sequoia Capital is in early discussions to raise a $5 billion venture fund, people familiar with the plans said. The financial vehicle, more than twice the size of the last fund, is designed to help the venerable Silicon Valley firm defend against wealthy foreign investors while ensuring their own startups are able to stay private as long as they’d like.

The fund would invest almost exclusively in technology startups already in Sequoia Capital’s portfolio, said the people, who asked not to be identified discussing preliminary plans. If Sequoia Capital can attract enough interest, it will begin investing from the fund in the second quarter of 2018, the people said.

Sequoia Capital is looking to capitalize on tech companies staying private longer. In addition to funding companies directly, the firm is looking to amass larger stakes in its chosen startups by buying holdings from entrepreneurs and early employees, the people said. It’s a tactic frequently used by SoftBank Group Corp., which is currently offering billions for shares in Uber Technologies Inc.

Andrew Kovacs, a spokesman for Sequoia Capital, declined to comment. Some details of the plan were reported earlier by technology website Recode.

The venture funds of top firms have been growing in size, but $5 billion is a substantial leap for Sequoia Capital. It would be the largest fund of any venture capital firm, exceeding the $3.3 billion raised by New Enterprise Associates this year.

Although SoftBank isn’t a venture capital firm, the Japanese company is sending shockwaves through Silicon Valley boardrooms. Since raising a nearly $100 billion technology fund with Saudi Arabia, SoftBank has bought into some of the hottest names in U.S. technology, including Slack Technologies Inc. and WeWork Cos.

Because of SoftBank’s deep pockets, an investment from the firm often changes the power dynamic in a company, said TrueBridge Capital co-founder Edwin Poston, an investor in prominent venture firms like Sequoia Capital, Accel, Andreessen Horowitz and Peter Thiel’s Founders Fund. But many entrepreneurs can’t resist an approach by SoftBank because it generally comes at a high share price, he said. “It’s cheaper money.”

Investors are trying to find their place in a changing industry. “The risk that the public markets would take is now taken by VCs,” Poston said. “It’s a new world.”

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