Sequoia Capital, one of Silicon Valley’s leading venture capital firms, is in the process of splitting itself up and transforming its Chinese arm into an independent company amid growing tensions between China and the United States over investment and access to advanced technologies.
The firm announced Tuesday that it planned to split into three independent partnerships, with its businesses in China and India adopting new brands and keeping the Sequoia name in the United States and Europe. The company’s global footprint had become “increasingly complex” to manage, according to a statement from Sequoia’s managing partner Roelof Botha; the company’s Chinese head, Neil Shen; and the head of India, Shailendra Singh.
In an interview, Mr. Botha said Sequoia had been evaluating whether a centralized model made sense “over the years.” The issue came to a head in recent months and “it just became clear to us that the cost of keeping it all together and the background wasn’t worth it,” he said.
“We are increasingly dealing with portfolio conflicts between entities as founders now have truly global ambitions,” said Mr. Botha. “And the brand confusion was just starting to annoy everyone.”
Sequoia’s Chinese operations will be renamed HongShan. Sequoia’s operations in India and Southeast Asia will be called Peak XV Partners.
Sequoia has more than $53 billion in assets under management in the United States and Europe, $56 billion in China, and $9 billion in India and Southeast Asia. The company’s operations in the United States and Europe have generated returns of more than $30 billion over the past five years, according to a person familiar with the fund’s performance.
Since entering China in 2005, Sequoia has played a prominent role in the rapid and lucrative rise of the Chinese tech giants. Notable investments include ByteDance, the owner of the TikTok video app; the fintech company Ant Group; and the fast-fashion retailer Shein. The company has invested in more than 1,000 companies in China, including in emerging tech sectors such as electric vehicles and biotech.
Mr. Shen, the head of Sequoia China, sits on the board of directors of ByteDance, a company that has come under scrutiny as TikTok faces the wrath of US lawmakers over its alleged ties to the Chinese government, with executives from the hugely popular app are facing questions whether it spied on Americans on behalf of Beijing.
Lately, venture capital investors have become hesitant to pump money into China: Transaction volume fell by half last year to about $69 billion, the lowest level in six years, according to PitchBook, a research firm. Not all of that can be linked to geopolitical tensions, with China’s economy slowing sharply until late last year while under strict “zero Covid” restrictions.
But doing business in China has become more complicated, especially in sensitive sectors such as technology, as the United States and China compete for economic supremacy.
The United States has weighed in on restrictions on investment in China, prompting strong opposition from some major investors and hesitation from some Biden administration officials concerned that overly broad measures could lead to unintended consequences. The possible restrictions are also being drafted as the government also tries to ease tensions with the Chinese government after a period of strained relations.
At a hearing before the Senate banking committee last week, Paul Rosen, the Treasury’s assistant secretary for investment security, said the administration was “working toward establishing a limited and focused program” to limit investments in certain sensitive technologies with implications for the limit national security. such as advanced semiconductors, artificial intelligence and quantum computing.
The US government already prohibits domestic companies from selling certain technologies directly to China, and monitors investments made by Chinese companies in the United States for security risks.
The Chinese government has recently targeted consulting and consulting firms with foreign ties, raising the alarm of executives in the West. These companies help foreign companies assess investments and play a particularly important role in China, where reliable information is difficult to obtain for companies looking to invest in the country.
Changche, Anne Swanson And Michael J. de la Merced reporting contributed.
