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Sequoia Capital looking to raise another fund

VC firm closed out a nearly $1 billion fund in August

Innovation series by Steven Loeb
December 4, 2012
Short URL: http://vator.tv/n/2c27

The amount raised by VCs may have slowed last quarter, but that is not going to stop firms from continuing to raise money to invest.

Only a few months after raising its last fund, venture capital firm Sequoia Capital is at it again. The firm is looking to raise a seed fund, according to a Form D filed with the Securities and Exchange Commission on Tuesday.

The form is light on details: it does not say how much Sequoia Capital hopes to raise, saying that the amount is “indefinite,” and so far it does not look like any money has been invested as of this time.

VatorNews contacted Sequoia to get more details, but it was unavailable for comment, so the best we can do is guess. Considering that Sequoia’s last two funds both hovered around the $1 billion range, the easy presumption to make would be that the new fund will be around the same amount.

In 2011, Sequoia Capital 2010 LP raised over $1.3 billion, and in August, it was reported that Sequoia had surpassed its goal of raising $975 million for three early-stage funds.

The funds will focus on the United States, China and Israel, with a different fund for each country. The stated goals were $450 million for its U.S. fund, $325 million for its China fund and $200 million for its fund in Israel, called Sequoia Capital Israel V LP, which is focusing on information technology.

Creating a separate fund for Israel is standard practice for the firm, but splitting the remaining money among the remaining countries is not how the firm operated with Sequoia Capital 2010 LP.
The $200 for the Israeli fund was in line with its previous two funds for the country, Sequoia Capital Israel III LP and Sequoia Capital Israel IV LP, which also raised around $200,000 in 2005 and 2008, respectively.

Sequoia’s investments in Israel seem wise, and forward thinking, when you consider that a report conducted by research firm Startup Genome, called the Startup Ecosystem Report 2012, ranked the top 20 startup ecosystems. Silicon Valley came in first, but Tel Aviv, Israel came in second.

Despite its young age and small population, Israel, the report said, has the highest density of startups in the world, with 63 companies listed on Nasdaq. That is more than Europe, Japan, Korea, India, and China combined. 

Founded in 1972, and celebrating its 40th anniversary this year, Sequoia has funded companies including Apple, Aruba Networks, Google, YouTube, PayPal, Cisco Systems, Oracle, Electronic Arts,Yahoo!, NVIDIA, Navigenics, Cotendo, Atari, Ameritox, Kayak, Meebo, Admob, Zappos, Green Dot and LinkedIn.

The state of the VC market

It’s a little surprising that Sequoia would be raising another fund so quickly, considering that the amount of capital raised for VC funds was down last quarter.

There were 53 U.S. venture capital funds in the third quarter of 2012, which raised around $5.0 billion. Despite the larger number of deals, there was a 17% decrease by dollar commitments compared to the second quarter of 2012, which saw 43 funds raise nearly $6.0 billion.

This has, in turn, affected the amount of money that VC firms can invest.  

VCs invested $6.5 billion in 890 deals in the third quarter of 2012, according to a MoneyTree Report from PricewaterhouseCoopers. Quarterly venture capital investment activity declined 11% in dollar volume and 5% in the number of deals. In the second quarter of 2012, VCs invested $7.3 billion in 935 deals.

Investment for the first nine months of 2012 was $19.9 billion in 2,661 deals. Unless, VCs pour $9 billion into investments in the fourth quarter (2011 saw $29 billion invested), 2012 could end up down in both dollar and deal volume. The last time that happened was in 2009, when, as you might remember, the economy was in pretty bad shape. In that year, investors put in $20 billion into startups versus $30 billion in 2008.

Some think that this might be based of the uncertainty surrounding the looming fiscal cliff, which has put a damper on the amount of capital that is willing to be risked. 

Sequoia Fundraise

(Image source: http://venturebeat.com)


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