Sequoia Capital Defies Market Trends with 25% Fund Markup
Key Highlights
- 24.6% valuation increase for Sequoia’s 2020 U.S. Venture XVII Fund
- Remarkable growth achieved without any portfolio exits
- Performance bucks industry trends for 2020 vintage funds
- AI investments likely driving the fund’s paper gains
Breaking Down Sequoia’s Strategic Move
In a bold demonstration of confidence, Sequoia Capital has marked up its 2020 flagship fund by 24.6% as of June 2024, according to PitchBook analysis of University of California endowment data. This valuation adjustment comes despite the fund having zero exits to date—a rare occurrence in venture capital.
Why This Markup Stands Out
- Challenging Fund Vintage: Most 2020-2021 vintage funds face headwinds due to inflated valuations from that era
- AI-Driven Growth: Sequoia’s strategic bets on AI leaders like OpenAI, Glean, and Harvey appear to be paying off
- Sector Mismatch: While AI valuations soar, other tech sectors haven’t seen similar recovery
The Bigger Picture
The $800+ million Fund XVII, which closed in 2022, represents a fascinating case study in modern venture capital:
- Portfolio Strategy: Heavy AI exposure may be insulating the fund from broader market pressures
- Valuation Philosophy: Shows Sequoia’s willingness to recognize paper gains in high-growth sectors
- Market Timing: Demonstrates how top firms can capitalize on specific tech waves despite unfavorable macro conditions
This development suggests that while many 2020-era funds struggle, sector-specific strategies can still generate impressive paper returns. However, the true test will come when these AI investments face liquidity events in the public or private markets.
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