Venture capital giant, Sequoia Capital, is splitting its China business into a separate entity amid rising tensions between Washington and Beijing.
The Silicon Valley firm, which has bet on fast-growing tech companies like TikTok’s ByteDance and parent Alibaba, said on Tuesday it would run its Chinese business as an entity “completely independent” from its US operations.
The Chinese arm will ditch the Sequoia name and instead call it HongShan, a romanization of its Chinese name.
The venture capital firm will also separate its Indian and Southeast Asian businesses into a third entity, she added, adding that the changes will be in place by March next year.
“There’s a lot in common now” between the different Sequoia entities, Neil Shen, the billionaire founder of Sequoia China, told the Financial Times. He said talks about splitting the companies had “evolved over the last two or three years”.
The split marks the end of one of the most successful investment alliances between the United States and China. It has reaped the rewards of the American mothership and bequeathed generations of Chinese tech companies since Shen launched Sequoia China in 2005 as an arm of Sequoia Capital.
But Beijing’s campaign to rein in its biggest tech companies has tamed many of the internet groups that Sequoia China funded and profited from.
At present, Sequoia China is run independently of the US business but shares some of its profits with the global group. This will not be the case after a breakup, according to the person close to the matter.
“It is becoming increasingly complex to run a decentralized global investment business,” the group told investors.
“We will transition to completely independent partnerships and become premium companies with separate brands no later than March 31, 2024.”
Sequoia Capital China raised $9 billion across several funds in the past year, from investors including California’s Calpers, the largest public pension fund in the United States, as well as Massachusetts Pension Reserve Investment Fund and Canada’s CDPQ and CPP Investments, according to the provider. PitchBook data.
Funds from investors were raised independently of the American team. Half of the capital came from US investors, while the rest came from global pension funds and other institutional investors, according to a person involved.
A person close to the matter said the split would not affect the way the money was invested.
In a speech to China’s top political advisory body last year, Chen said Beijing should prioritize industries such as artificial intelligence, robotics and green energy.
Some venture capital executives took it as a sign of his willingness to align his investment themes with Beijing’s “shared prosperity” agenda.
Among the company’s previous setbacks, Internet groups backed by Sequoia including Alibaba and Meituan have been hit with heavy antitrust fines, while Didi Group has been forced to download from the New York Stock Exchange. China has also appointed an official to oversee ByteDance’s main Chinese entity.
The biggest blow to Sequoia China came with Beijing’s crackdown on online education companies in 2021, when officials moved overnight to make the business models of many emerging startups illegal. The rules affected the company’s large investments in groups such as Zuoyebang and VIPKID.
