Sequoia China goes solo under HongShan brand, a sign that the bromance between US funds and China tech start-ups is over
- The decision to make Sequoia China a separate entity is a fresh sign of decoupling between the world’s two largest economies
- The advantage of being able to work both sides has become a liability as rivalry between Beijing and Washington has intensified
The separation of Sequoia China, the poster child for the financial bromance between the US and China over the last 18 years, from its US parent is a watershed moment in China’s venture capital industry, as American capitalists divorce themselves from Chinese entrepreneurs, industry insiders said.
Few institutions have played such as an important role as Sequoia China, which was founded by Yale-educated Neil Shen Nanpeng, to connect US funding with China’s tech start-ups, but the rising acrimony between Beijing and Washington has made it hard for intermediaries like Sequoia China to align interests across the Pacific.
The China split is part of a global restructuring by Sequoia Capital, the American venture capital giant based in Menlo Park, California. The Chinese operation has been rebranded as HongShan, while Sequoia’s operations in India and Southeast Asia will be made independent under the name Peak XV Partners.
The decision to make Sequoia China a separate entity is a fresh sign of decoupling between the world’s two largest economies, although Sequoia Capital did not mention geopolitical consideration in explaining the move.
Levy Cao, a venture partner at Shanghai-based investment firm Capital O, said the Sequoia China split marks the beginning of the end. “The Chinese venture investment world will probably need to remember this moment, as it signifies that US dollar funds [in China] are poised to bid departure to their good old days in search of new positioning and direction in the country,” he said.
Sequoia China was established in 2005 when the country’s nascent internet industry was crying out for venture capital funding. The firm quickly emerged as China’s No 1 venture capital house, investing in the country’s top internet players, including e-commerce giant Alibaba Group Holding, top food delivery platform Meituan, and the world’s leading drone maker DJI, generating stellar returns for investors.
Alibaba owns the South China Morning Post.
In one famous case, Sequoia China was the sole investor in the 2010 A-round funding of Meituan, providing US$2o million to founder Wang Xing, and helping the platform win a brutal price war in group buying.