Aspectos éticos

Global stock exchanges are also knocking on the doors of Chinese start-ups. “Hong Kong, London, Singapore, Tokyo, even Frankfurt, all are marketed heavily to promising Chinese companies, giving entrepreneurs more choices and allowing them to balance the issues of cost, time and regulatory requirements,” Zhang says.

Michael Moritz, Sequoia Capital

be found, and support portfolio companies, wherever their operations lead them, with-out losing the fundamentals of a proven approach. “I think we’re all wary of being prisoners to heritage and assuming that tomorrow will be like yesterday or today,”

says Moritz, “but understand that embark-ing on new pursuits brembark-ings the attendant risk of distraction from what worked in the past. It’s a balancing act.”

The following survey of Sequoia Capital’s global operations offers insight into the progression of the fi rm’s international operations, global business drivers, and localized investment approach through the perspectives of its partners.

SEQUOIA CAPITAL U.S. RECENT EXITS: ATOM ENTERTAINMENT, ISILON, YOUTUBE, ARUBA AND SOURCEFIRE

Israel

With its strong tech-nology industry and close ties to Silicon Valley, Israel was perhaps the natural fi rst step for Sequoia Capital, which began operating in Israel in 1998 and raised its fi rst Israel-dedi-cated fund in 1999. Randy Ditzler, one of the general partners of Sequoia Capital Israel, characterizes Israel as a “confi ned geography, a lot of educated people, second-generation entrepreneurs, and no domestic market like the India, China and the U.S.”

For Ditzler, globalization means that inter-dependencies become even more important for Israeli companies that have always looked abroad for markets. “To become a company of merit, you’ve got to be able to leverage resources in India, markets in the U.S., and distribution and manufactur-ing in China,” says Ditzler. “You’ve got to operate on a global scale if you want to be successful.”

Sequoia Capital Israel can point to suc-cesses like Topio, a portfolio company in the data security space that Sequoia Capital incubated in Israel and helped move to Silicon Valley. Topio was ultimately acquired by Network Appliance at the end of 2006 for US$160 million. Mellanox Technologies is another company that Sequoia Capital helped to follow the Israeli model of building research and operations in Israel and establishing headquarters in the United States. The semiconductor-based communications equipment company went public on NASDAQ in early 2007.

Ditzler says that Sequoia Capital sees strong deal fl ow and exit activity coming out of Israel. “Israel continues to be very innovative, and we don’t see any reason why that would stop,” he says. A new, younger generation of entrepreneurs is supporting the deal fl ow in Israel, accord-ing to Ditzler. “We’ve gone through a cycle of entrepreneurship that has perme-ated through the universities, and young people are beginning to start companies on a pretty frequent and prolifi c basis. We’re bullish on Israeli geography producing some great entrepreneurs.”

SEQUOIA CAPITAL ISRAEL RECENT EXITS:

TOPIO, FOLLOWAP, PORT AUTHORITY AND MELLANOX

China

Sequoia Capital’s next international move was the launch of Sequoia Capital China in 2005 with the closing of a US$169 million China-dedicated fund with a full team on the ground—one of the fi rst moves into China of this scale by a Silicon Valley fi rm. Sequoia Capital has since closed two more China-dedicated funds, the Sequoia Capital China II (early stage) and Sequoia Capital Growth Fund I.

Fan Zhang, one of the founding managing partners of Sequoia Capital China, explains that one of the factors that attracted Sequoia Capital to China is the country’s “booming consumer market that provides an oppor-tunity to create companies to defi ne certain sectors and fi ll the need for strong brands, not only in technology but also tech-related consumer services and more traditional industries.” The timing was right because

“only recently has the venture industry in China been able to establish a virtuous cycle of investments and exits,” says Zhang.

Sequoia Capital invests in China without a preference in terms of a company’s stage of development. “We want to fund businesses that are geared to become a dominating force

1990 2000

1995 Finances Yahoo! (NASDAQ: YHOO)

1999 US$33 million Sequoia Capital Israel I Finances Google (NASDAQ: GOOG) Finances PayPal (NASDAQ: PYPL)

2001 US$150 million Sequoia Capital Israel Fund II

2005 US$169 million Sequoia Capital China Fund I US$862 million Sequoia Capital Growth Fund III US$190 million Sequoia Capital Israel III Finances YouTube (Acquired by Google) Finances ChinaIP.TV (TSE: 2149)

2006 US$383 million Sequoia Capital India Growth Fund I US$420 million Sequoia Capital XII

Fan Zhang

Sequoia Capital China

Randy Ditzler Sequoia Capital Israel

32 GL O B A L VE N T U R E CA P I TA L IN S I G H T S RE P O RT 2007 SE Q U O I A CA P I TA L:

GL O B A L FI R M, LO C A L IN V E S T O R S

in their respective sectors,” says Zhang,

“whether it’s the pre-IPO company with a lot of cash fl ow or the chip design break-through that a brilliant group of engineers is just beginning to develop. In both cases, we see them as becoming dominant forces in their industries.” Zhang explains that China presents the opportunity to launch business models in a range of sectors—including fi nancial services, consumer packaged goods, retail, telecommunications services, transpor-tation services, and infrastructure services—

that in developed markets were created long ago and have come to be taken for granted.

Zhang sees the growing number of stock exchange options for Chinese company IPOs as an important emerging trend and a positive development for the venture industry. As an alternative to NASDAQ, the traditional choice for Chinese technol-ogy companies, the Hong Kong Stock Exchange offers proximity and cultural affi nity, says Zhang. He notes that China’s domestic exchanges have also become viable exit paths for Chinese start-ups as a result of several years of reform.

Global stock exchanges are also knock-ing on the doors of Chinese start-ups.

“Hong Kong, London, Singapore, Tokyo, even Frankfurt, are all marketing heavily to promising Chinese companies, giving entrepreneurs more choices and allow-ing them to balance the issues of cost, time and regulatory requirements,” Zhang says. The Sequoia Capital investment Asia Media provides an example of this trend in action. The mainland China company, a provider of online and wireless television program guide content, chose to conduct its IPO on the Tokyo Stock Exchange Mother’s Board in early 2007. Asia Media was also the fi rst mainland China company to go public in Japan.

SEQUOIA CAPITAL CHINA RECENT EXITS: ASIA MEDIA (AKA CHINA IPTV) Westbridge was the most active venture capital investor, with US$350 million under management. Prior to the merger, the two fi rms had invested jointly in Indian companies such as Bharti Telesoft and Mauj Telecom. The new group, Sequoia Capital India, then raised a US$400 mil-lion India-focused fund.

The pace of globalization in India is rapidly accelerating, according to Sumir Chadha, one of the managing directors of Sequoia Capital India. “We see early-stage Indian companies seeking to establish partnerships and alliances with U.S., Chinese and even Israeli companies at very early stages of development,” says Chadha. “To be success-ful, entrepreneurs need to be able to enter into networks not only in India, but also in different parts of the world.”

In this environment, Sequoia Capital’s global model provides a platform for helping its Indian portfolio companies to build value, says Chadha. “Helping an entrepreneur to reach the right people in the U.S., the right people in China, the right people in Israel to build a successful company is something that’s very easy to say, but very hard to do,”

Chadha notes. “When we do it right, it cre-ates a lot of goodwill that reverbercre-ates in the Indian entrepreneurial community.”

As an example of this approach, Chadha cites FirstSource, a business process outsourcing (BPO) company that went public in the fi rst part of 2007. “We’ve been with FirstSource for six years,” says Chadha, “helping them to recruit management, make acquisitions,

gain customers and strategize about the U.S.

market. We supported their development from a very small company with US$3 mil-lion in revenues to the third largest BPO company in India, with US$175 million in revenues and growing 50% per year.”

In Chadha’s view, one of the important features of the rapid growth in India has been a rise in entrepreneurship. “The whole concept of a market economy today is established and respected—this wasn’t the case even fi ve or six years ago. We increasingly see younger entrepreneurs, partly as a result of the new companies being built around consumer tastes, but largely as a result of changing attitudes.”

SEQUOIA CAPITAL INDIA RECENT EXITS:

ROYAL ORCHID HOTELS, FIRSTSOURCE AND IDEA CELLULAR leaders. The fi rm’s latest growth fund rep-resents a signifi cant step up in focus on this segment, however, with US$861 million under management. Not just a quantita-tive expansion, the fund broadens Sequoia Capital’s growth-stage investing beyond the West Coast to North America, and even to Europe and Asia in certain situations.

Scott Carter, the partner leading Sequoia Capital’s growth stage investing, sees a business environment where “entrepre-neurial-fi nanced companies today have real opportunities to expand into many different markets in a way that didn’t exist even fi ve Sumir Cheddha

Sequoia Capital Trust

Scott Carter Sequoia Capital

years ago. At the same time, entrepreneurs are becoming more well-informed and sophisticated about the fi nancing options available to them,” says Carter. “Good growth businesses have many fi nanc-ing alternatives, be it senior debt, private equity or venture capital.”

In the face of this competition, Sequoia Capital differentiates itself with its experi-ence and lessons learned in helping entre-preneurs, according to Carter. “If you look at our 35-year history, we have been incredibly fortunate to partner with what ultimately became market-leading companies across a variety of sectors, allowing us to experi-ence fi rsthand the attributes that can help a company to become an enduring business over the long term,” says Carter. “We have also made a tremendous number of mistakes over the years and learned valuable lessons that help us to keep things in perspective when we are working with growth compa-nies.” The extensive business relationships that Sequoia Capital has developed through funding more than 600 companies is another point of differentiation, says Carter.

Moritz adds that one of the challenges faced by venture capitalists in the growth company market is perception. “I think many entrepreneurs, particularly CEOs of established companies, would be very sur-prised by the length of time in which fi rms like ours are prepared to be shareholders of companies,” says Moritz. “We have one partner who was involved with Cisco Systems for almost two decades and sev-eral others who have served the needs of a variety of different companies for close to a decade.”