JUNE 16, 2014

Sequoia Capital Teardown

Sequoia Capital is one of Silicon Valley's storied VC firms. A glimpse into their financing, exit and people data provides us a unique data-driven view into where the firm sees opportunity. TWITTER (HTTPS://TWITTER.COM/INTENT/TWEET?URL=HTTP%3A%2F%2FWWW.CBINSIGHTS.COM%2FBLOG%2FSEQUOIA­ CAPITAL­TEARDOWN%2F&TEXT=SEQUOIA CAPITAL TEARDOWN&VIA=CBINSIGHTS&RELATED=CBINSIGHTS)

Sequoia Capital is one of the original venture capital firms, (HTTP://WWW.LINKEDIN.COM/SHAREARTICLE? (MAILTO:? (HTTPS://GETPOCKET.COM/SAVE? (HTTPS://WWW.FACEBOOK.COM/SHARER/SHARER.PHP? (HTTPS://PLUS.GOOGLE.COM/SHARE? active before Silicon Valley was Silicon Valley. In recent months it has maintained its MINI=TRUE&URL=HTTP%3A%2F%2FWWW.CBINSIGHTS.COM%2FBLOG%2FSEQUOIA­ SUBJECT=SEQUOIA+CAPITAL+TEARDOWN&BODY=HTTP%3A%2F%2FWWW.CBINSIGHTS.COM%2FBLOG%2FSEQUOIA­ URL=HTTP%3A%2F%2FWWW.CBINSIGHTS.COM%2FBLOG%2FSEQUOIA­ U=HTTP%3A%2F%2FWWW.CBINSIGHTS.COM%2FBLOG%2FSEQUOIA­ URL=SEQUOIA+CAPITAL+TEARDOWN reputation for investing CAPITAL­ CAPITAL­ CAPITAL­ CAPITAL­ ­ early in Unicorn companies TEARDOWN%2F&TITLE=SEQUOIA+CAPITAL+TEARDOWN) TEARDOWN%2F) TEARDOWN%2F) TEARDOWN%2F HTTP%3A%2F%2FWWW.CBINSIGHTS.COM%2FBLOG%2FSEQUOIA­ (http://www.cbinsights.com/blog/sequoia-capital-largest-exits). But WhatsApp is only ) CAPITAL­ TEARDOWN%2F) the most recent example of Sequoia’s incredible success. Below is CB Insights’ teardown of Sequoia Capital. Notes: 1. Where’s the data & viz from? 100% of the visualizations and data you see in this teardown are directly from the CB Insights platform’s Investor Analytics (http://cbinsights.com/investor-analytics) tool. 2. What’s a Teardown? A product teardown

(http://en.wikipedia.org/wiki/Product_teardown) is the act of disassembling a product to understand its parts, functionality, etc. An investor teardown is analogous in that we’re trying to understand a firm by analyzing data around their financing strategy, investment thesis, key people, exit history, investment syndicates and more. Specifically, we’ll cover: Recent financings (https://www.cbinsights.com/blog/sequoia-capitalteardown#financing) Exit activity (https://www.cbinsights.com/blog/sequoia-capital-teardown#exits) Funding history (https://www.cbinsights.com/blog/sequoia-capitalteardown#funding) Notable partners (https://www.cbinsights.com/blog/sequoia-capitalteardown#partners) Investor Analytics (https://www.cbinsights.com/blog/sequoia-capitalteardown#analytics) Investment Syndicates (https://www.cbinsights.com/blog/sequoia-capitalteardown#syndicates) Bonus: Get all of our investor teardown research for free Get free in­depth portfolio and investment analysis, data and graphs on some of today's most notable investors. Enter your email address here... Send me the research!

Recent Financings – Deal activity stays steady; Participating in large rounds

Sequoia saw modest growth in its number of deals from 2012 to 2013, but the firm looks poised to have a bigger year in 2014 having already participated in more deals than by this time last year or the year before. 2014 has also been notable because of the number of large financings that Sequoia has participated in (the graph below illustrates this). These include AirBnB’s (http://www.cbinsights.com/company/airbnb) $500M Series C and SunRun’s (http://www.cbinsights.com/company/sunrun) $150M Series E, among several other large late-stage investments. Here are some of Sequoia’s most recent financings that highlight some of Sequoia’s large investment rounds: Sequoia led the $75M Series E financing of Okta (http://www.cbinsights.com/company/okta), an enterprise-grade identity management service. Sequoia has led each round of Okta financing since Series C at the end of 2012. Sequoia became involved in Coupang

(http://www.cbinsights.com/company/coupang), a Korean collective buying company, in May by leading their $100M Series C round. The deal is part of Sequoia’s increasing interest in Asian investments. More discussion on that later. DoorDash (http://www.cbinsights.com/company/doordash), a growing food delivery service, raised $17.3M in Series A led by Sequoia in May. Though Sequoia recently participated in several late-stage financings, it remains most active in earlier rounds. Sequoia was the only investor in SimpliSafe’s (http://www.cbinsights.com/company/simplisafe) $57M Series A round in May. Their investment in the home security company is reminiscent of their similarly lonely funding of WhatsApp, which of course went to be acquired by Facebook for $19B.

Sequoia Capital has participated in a number of huge financings in 2014 to date. (https://twitter.com/share? text=Sequoia+Capital+has+participated+in+a+number+ of+huge+financings+in+2014+to+date.&url=http://www. cbinsights.com/blog/sequoia­capital­teardown/)

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Below is a graph of Sequoia’s monthly investment activity (deals & funding) over time taken from their profile on CB Insights.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture.png)

Exit Activity – Riding investments from Series A to big exits

Sequoia has seen 6 exits so far in 2014 with 1 IPO, 4 acquisitions, and 1 asset sale. Sequoia remains a prominent VC firm because of their ability to get into notable exits and get there early. In all but one of the exits so far in 2014, Sequoia first invested in the Seed or Series A round. Here are some of Sequoia’s notable exits in 2014. MobileIron (http://www.cbinsights.com/company/mobileiron), an enterprise mobile device management company, went public in May at a valuation of $671.8M. Sequoia had invested in every round since Series A in 2008. Sequoia also jumped on Kontera Technologies (http://www.cbinsights.com/company/kontera-technologies), a content management platform, at Series A in 2006 and funded it all the way to its acquisition by Amobee Media Systems for $150M in June. Sequoia’s most notable exit, of course, was WhatsApp (http://www.cbinsights.com/company/whatsapp)which was acquired by Facebook in February for a staggering $19B. Sequoia was the sole investor (http://www.cbinsights.com/blog/sequoia-capital-whats-app-sole-investor) in WhatsApp, funding their Series A in 2011 and Series B in 2013 for a combined $60M. The scatterplot below highlights Sequoia’s exits over time which had disclosed valuations. As can be seen, the firm participates in many exits near, at or above the billion dollar mark highlighting the firm’s ability to get into venture’s black swans (http://www.cbinsights.com/blog/billion-dollar-exit-venture-capital) quite regularly.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture1.png)

Sequoia regularly gets into venture's black swan exits (https://twitter.com/share? text=Sequoia+regularly+gets+into+venture%27s+black+ swan+exits&url=http://www.cbinsights.com/blog/sequoi

a­capital­teardown/)

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Funding History – A shifting interest in Asia and stealthy seed funding in the U.S.

Sequoia’s two most recent funds reflect the firm’s global focus and, in particular, its Asia orientation. In an upcoming post, we will look at Sequoia’s Indian investments in depth, but deals by the firm in India grew 37% and total funding rose 72% YoY. The last two years have also seen Sequoia shift its focus in Asia from eCommerce companies more toward Mobile Software & Services. In the U.S., Sequoia formalized a previously stealthy program by establishing their U.S. Scout Seed Fund 2013 last February. Sequoia was the first VC to confirm that they are working with and funding well-known angel investors as “scouts,” investing on behalf of Sequoia. This has allowed Sequoia to quietly get into seed and angel investing, and has since funded 4 startups at the seed stage. Below is a screenshot of Sequoia’s recent fund history.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture11.png)

Notable Partners – Big names coming from big exits

Here is the activity of some of Sequoia’s most notable partners. Jim Goetz was responsible for the backing of WhatsApp and its acquisition by Facebook for $19B. Specializing in mobile and enterprise software companies, he also sits on the boards of four billion-plus public companies he brought to IPO in the last two years: Ruckus Wireless (http://www.cbinsights.com/company/ruckus-wireless), Palo Alto Networks (http://www.cbinsights.com/company/palo-alto-networks), Barracuda Networks (http://www.cbinsights.com/company/barracuda-networks), and Nimble Storage (http://www.cbinsights.com/company/nimble-storage). Jim’s portfolio still holds gaming company Pocket Gems (http://www.cbinsights.com/company/pocketgems), game maker support platform Chartboost (http://www.cbinsights.com/company/chartboost), and ad tech company Drawbridge (http://www.cbinsights.com/company/drawbridge). Below is a look at Jim’s press mentions in the last 3 years. Compared to the other partners, he receives relatively little

press, but the WhatsApp acquisition caused a large spike in February.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture14.png) Alfred Lin brought Zappos (http://www.cbinsights.com/company/zappos)from a small startup to its $1.2B acquisition by Amazon in 2006 before joining Sequoia. He invests primarily in consumer internet, enterprise, and mobile companies. He led Sequoia’s investments in AirBnB starting at the seed stage and most recently in its $500M Series D round in April at a $10B valuation. Alfred sits on the boards of AirBnB, DoorDash (http://www.cbinsights.com/company/doordash) and Instacart (http://www.cbinsights.com/company/instacart) among others. Roelof Botha joined Sequoia after leading PayPal (http://www.cbinsights.com/company/paypal)through its IPO and acquisition by eBay. He most notably led the initial financing of YouTube in 2005. Based on disclosed valuations, his unexited portfolio (http://www.cbinsights.com/blog/roelof-bothasequoia-boards), in aggregate, sits at a cool $12B. He currently sits on the boards of Square (http://www.cbinsights.com/company/square)and Jawbone (http://www.cbinsights.com/company/jawbone), both of which he shares with Mary Meeker of Kleiner Perkins Caufield & Byers. Kleiner, as you’ll see below in our analysis of Sequoia’s syndicates shares a number of portfolio companies with Sequoia. He also sits on the boards of Xoom (http://www.cbinsights.com/company/xoom), and MongoDB (http://www.cbinsights.com/company/mongodb). Here are a few other investors Botha shares boards with.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture15.png) Michael Moritz was one of the earliest partners at Sequoia, joining in 1986 well before more recent venture capital booms. He has led investments in big names like Google, Yahoo, PayPal, Kayak, LinkedIn and Zappos. While less active in the management of Sequoia, he remains on many boards. His portfolio includes Stripe and Klarna, both of which recently received big funding rounds of $80M and $125M, respectively.

Investor Analytics

Industry Heatmap – Investment Thesis highlights more internet & mobile – less hardware Comparing 2010-11 and 2012-13 shows a shifting focus for Sequoia. Deals in the Mobile & Telecommunications sector have increased in number and total funding within the Mobile Software & Services industry is responsible for the growth. Internet remains #1 in deals and funding, but a greater proportion of investment is now directed to the Internet Software & Services industry with eCommerce receiving fewer deals. Investments in Computer Hardware & Services have also fallen significantly – almost 50%. Within the sector, Specialty Computer Hardware companies have disappeared from Sequoia’s portfolio. The Industry Heatmap shows the distribution of investments by industry for 2010-11 on the left and 2012-13 on the right. The size of the box represents the number of deals and the darkness of the blue represents total funding.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture5.png) Geography Heatmap – Israel leads for now, but India is coming

As one would expect, North America receives the vast majority of funding. What is more interesting is the distribution of funding outside of the U.S. Israel commanded the most attention in the last 2 years, likely on the back of the $200M Israel V fund raised in August 2012. Deals in China have fallen off as the heatmap below illustrates. Expect India to take back a larger portion of Sequoia’s investments in Asia as the huge $530M India Fund IV raised at the end of May opens greater opportunity for Indian companies, especially those in the mobile and internet sectors. The Geography Heatmap for Asia shows distribution of funds by geography for 2010-11 on the left and 2012-13 on the right. The size of the box represents the number of deals and the darkness of the blue represents total funding.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture6.png) Financing Activity – Trending up Sequoia’s typical deal size has generally trended upwards over the last 5 years with a few notable spikes. Participation in Dropbox’s (http://www.cbinsights.com/company/dropbox) $250M Series B round in October 2011 is responsible for the jump in average deal size that quarter, and several large, late stage fundings in May 2012 account for the abnormally high average. Q2 2014 saw participation in several big deals: AirBnB ($550M), SunRun ($150M), Coupang ($100M), and Okta ($75M), but Sequoia was involved in almost twice as many deals this quarter as in quarters in the last two years, so typical deal size for this quarter has yet be determined. Median which is probably a better indication of Sequoia’s investment size has also inched up a bit over time with $18.8 million being the median deal size the firm participated in during the most recently completed quarter. Below is a screenshot from the Investor Analytics tab on CB Insights showing the deal size trends of Sequoia financings by quarter over time.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture7.png) Financing by Stage – Series A seeing many deals, later rounds seeing more money as expected Sequoia remains very active in the early stages with the most deals in Series A. Seed deals represent a very small portion of all deals, but that number could see further growth with the U.S. Scout Seed Fund 2013. While there are fewer deals to the later stages, they are seeing higher funding amounts on average. $100M+ fundings to Coupang, SunRun, AirBnB, MongoDB, and Mu Sigma (http://www.cbinsights.com/company/mu-sigma) in Series C or later are consistent with these numbers. Below is a look at trends in round participation in the last 2 years.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture8.png) New vs. Follow-on Investments – Emphasis on new companies Sequoia maintains a healthy balance of new investments and follow-on investments, or investments in companies in which Sequoia has already invested. Sequoia generally maintained an average of 40% of deals in new companies and 60% in follow-on over the last 5 years. Below is a screenshot from the Investor Analytics tab on CB Insights showing the ratio of new investments to follow-on by quarter over the last 5 years.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture9.png)

Investment Syndicates – Y Combinator is top feeder, Accel Partners is top coinvestor

Sequoia most often looks to Y Combinator companies for dealflow as the Investment Syndicate dashboard below illustrates. Also among the top feeders are SV Angel and angel Paul Buchheit. Accel Partners is both a top feeder and the top coinvestor. Sequoia has coinvested with Accel in 28 companies in 57 separate rounds. Accel Partners is one of only two companies in the top 5 firms to coinvest significantly at the Series A stage, along with Kleiner Perkins Caufield & Byers. Coinvestment with Intel Capital, DAG Ventures, and Tenaya Capital is limited almost exclusively to post-Series A rounds. Involvement with the top 5 coinvestors has remained largely constant except with DAG Ventures, which saw increased activity more recently. Below is our Investment Syndicate dashboard for Sequoia Capital which highlights and ranks top dealflow sources and coinvestors.

(http://www.cbinsights.com/blog/wp-content/uploads/2014/06/Capture10.png)

Notes: 1. 100% of the visualizations in this Teardown are from Investor Analytics (http://cbinsights.com/investor-analytics). No MS Excel necessary. 2. Visualizations are all interactive so you can click and see underlying transaction details. 3. Visit Sequoia Capital’s profile (https://www.cbinsights.com/i5f93f983524def3dca464469d2cf9f3e) to check out these visualizations on your own. 4. Need an account? Sign up here (https://cbinsights.com/signup.php).

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