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Sequoia is divided into three companies – Sequoia Capital in the US and Europe, Peak XV Partners in India and Southeast Asia, and HongShan in China – as the tiered venture firm struggles to assess the growing complexity of managing a decentralized operation.
The split – which will take effect by March next year – comes amid growing geopolitical tensions between China and the US, the world’s two largest economies. The India and Southeast Asia division has faced some optical and governance issues in its portfolio companies.
Sequoia downplayed why it was breaking up. “Running a diversified global investment business has become more complex. For example, each business has evolved to meet opportunities in their markets across a wide range of sectors,” the firm said in a post, co-authored by regional heads Rolof Botha, Neil Shen and Shailendra Singh.
“This has made centralized back-office operations more of a hindrance than an advantage. Additionally, as each company’s portfolio expands to include companies that are becoming global leaders, we see growing market confusion due to the shared Sequoia brand and portfolio conflicts across companies.
Even if Sequoia decides to reorganize its international branches as autonomous units, it will prompt its rivals to follow suit in the coming year.
The surprise announcement follows an increasingly challenging period for US venture capital funds investing in China. Since the Biden administration Work on projects Sequoia has to curb the flow of US dollars into China, where it has played a big role in fueling the country’s consumer internet industry for two decades.
The strategy is seen as a way to push China into developing technologies critical to national security, such as artificial intelligence, quantum computing and semiconductors. At the G-7 summit in late April, President Biden was present Seeks support from allies To support his plans to restrict foreign investment in China.
Sequoia Capital China had already slowed its pace significantly in China. The company raised $9 billion last July, but did just 62 deals between Q3 2022 and Q2 2023, compared to 177 deals between Q3 2021 and Q2 2022. Crunchbase.
Sequoia Capital China may take a more cautious approach to investing in China amid the changing political and economic landscape. There are other factors contributing to its decline. Most US dollar venture capital funds have withdrawn their investments since the country began a major regulatory crackdown on its consumer internet sector three years ago. VCs around the world are also very conservative amid the global economic slowdown.
It remains to be seen how the policies of the Biden administration will affect US venture capital investment in China. With a new brand and independent operations, HongShan will face the challenge of competing with China’s domestic venture capital firms in a new era where the development of the technology industry will support technology deeper than the consumer Internet.
As for Peak XV Partners, the India and SEA division said it has raised $9.2 billion across 13 funds under its previous brand name, investing in more than 400 startups, and plans to use the roughly $2.5 billion it raised last year.