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3 min read . Updated: 10 Jan 2022, 06:15 PM IST In a bid to expand the types of deals it does, Sequoia Capital, one of the U.S.’s largest venture-capital firms, has become a registered investment adviser with the Securities and Exchange Commission, according to a notice on the agency’s website.
The change in its regulatory status reflects the expansion of the Menlo Park, Calif.-based firm’s investment strategy from its original focus on backing early-stage Silicon Valley technology startups.
“[T]he Adviser’s scope has expanded as technology has revolutionized industries," read a description of the firm’s activities in a filing that Sequoia Capital Operations LLC made with the SEC dated Nov. 30.
In the SEC filing, Sequoia described its current strategy of investing primarily in seed, early and growth stages in companies in sectors such as business and consumer technology, financial services and energy. It also said it makes deals that aren’t traditional for venture firms, such as buying public stock and crypto assets, as well as the possibility of sponsoring a special-purpose acquisition company, or SPAC.
Sequoia’s new status was approved by the SEC and became effective on Jan. 3. The change applies only to Sequoia’s U.S. and European business. Registered investment advisers must comply with various SEC requirements. Venture firms are typically exempt from registration, which lowers their compliance burdens.
Sequoia was founded in 1972 and had $80.7 billion in assets under management as of Sept. 30, 2021, according to the filing it made with the SEC.
Sequoia Capital announced in October its intention to become a registered investment adviser.
The registration “expands our flexibility to support our portfolio companies through various financing events, such as secondaries or IPOs. It also enables us to further increase our investments in emerging asset classes such as cryptocurrencies and seed investing programs," Roelof Botha, a Sequoia partner who leads its U.S. and European business, wrote in a blog post at the time.
The plan to register was made as part of a restructuring under which Sequoia would set up an evergreen fund to manage holdings of publicly traded companies on behalf of its investors. Mr. Botha said in October that the firm already held about $45 billion in public company stock.
Sequoia Capital has created the evergreen fund, called Sequoia Capital Fund, and expects it to be closed in the first quarter of this year, according to a person familiar with the situation.
The SEC filing described risks associated with Sequoia’s strategy expansion.
“The family of related entities colloquially known as ‘Sequoia Capital’ continues to expand in scope and range of activities," the filing said. “This creates increased opportunities for conflicts of interest and increased competition for the time, attention and investment opportunities of Sequoia Capital investment professionals and/or each Fund. It also creates increased opportunities for disputes, liabilities and other burdens on such investment professionals," the filing said.
Venture firms must register as investment advisers if less than 80% of their assets qualify as venture investments, according to SEC rules.
Over the past couple of years, several large venture firms, including Andreessen Horowitz and Thrive Capital, have also registered as investment advisers with the SEC.
This story has been published from a wire agency feed without modifications to the text
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