WhatsApp deal: Sequoia Capital burnishes its reputation

Feb 22 2014, 21:04 IST
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In a business where top firms come and go, Sequoia has proved remarkably tenacious. In a business where top firms come and go, Sequoia has proved remarkably tenacious.
SummaryThe discussion never got serious and Sequoia never invested in Facebook

WhatsApp, Facebook deal: Shortly after moving to Silicon Valley in 2004, the young Facebook founder Mark Zuckerberg pulled a prank on Sequoia Capital by making an investment pitch in his pajamas.

The discussion never got serious and Sequoia never invested in Facebook. But now, Sequoia is getting the last laugh.

With the sale of its protégé company message service WhatsApp to Zuckerberg's Facebook for $19 billion, Sequoia found a way to make money from Facebook as well as solidifying its position as a titan of venture capital.

And it establishes partner Jim Goetz, who landed the deal, as one of Silicon Valley's top rainmakers.

"This would make a lot more founders want to work with Jim Goetz," said Sam Altman, a partner at Y Combinator, a programme for start-up companies whose previous start-up was backed by Sequoia.

In a business where top firms come and go, Sequoia has proved remarkably tenacious. Its big wins take on particular significance in an era when venture firms must beat back challenges from individual investors known as "angels" and crowdfunding, new technology that makes early-stage investments less crucial than they once were, and critics who say that venture capital investments aren't worth the trouble.

Facebook announced the acquisition deal on Thursday, astounding many with the price it paid for the service, which has 450 million users and is growing at 1 million a day.

Sequoia, which invested $60 million and made around $3 billion from WhatsApp, according to a source familiar with the situation, has squeezed a considerable sum out of Facebook, even if it never did invest in the social-media behemoth. Sequoia also backed photo-sharing service Instagram, which Facebook bought in 2012 for $1.01 billion.

The biggest venture investor in Facebook, Accel Partners, held $7.64 billion worth of Facebook shares at the time of that company's 2012 initial public offering (IPO).

Launched in 1972 by Don Valentine, a founder of National Semiconductor, Sequoia was one of the nation's earliest venture-capital firms. As most others of the earlier generation faded from the scene, Sequoia held its own, going on to fund companies including Apple, Oracle, Paypal and Google.

"We were so excited to meet with them," said David Rusenko, co-founder of web-hosting service Weebly, recalling his early interactions with Sequoia before the firm invested in his company three years ago. "Sequoia is the gold standard, as far as we were concerned."

Of course, not everyone holds that view. Silicon Valley impresario Sean Parker, for example,

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