China is becoming too hot to handle, even for a giant of venture investing
On June 6th Sequoia Capital, a 51-year-old stalwart of the venture-capital industry, announced it would split into separate American, Chinese and Indian businesses. Sequoia China has operated with a high degree of autonomy for a while, with Mr Shen calling most of the shots. So has Sequoia’s Indian and South-East Asian business, led by Shailendra Singh. By March 2024 the entities will no longer share investors or returns, as they have done for years.
Many of Mr Shen’s investments were indeed made for a globalised, connected world. He was an investor in Didi Global, a Chinese ride-hailing company whose listing in New York was hobbled by China’s government in 2021. He hoped to make American social media work in his home country by investing in the Chinese arm of LinkedIn, a networking platform for professionals—before growing censorship and onerous rules forced LinkedIn to give up almost completely on the country.
Meanwhile in America, where bashing China is just about the only thing that Democrats and Republicans can agree on, Sequoia and other investors face mounting political pressure to quit China. Montana has just banned TikTok, a short-video app in whose Chinese parent, ByteDance, both Sequoia Capital and Sequoia China have stakes.Investors and bankers in China have seized on Sequoia’s decision as a sign that the country is losing important business connections with the rest of the world.
Fraught geopolitics and heavy-handed domestic politics are taking a toll on investments in Chinese private assets. Funds that focus on such bets raised just $25bn last year worldwide, down by 77% from the year before, according to Bain, a consultancy . Greater China’s share of fundraising relative to the rest of Asia has fallen to a 15-year low. Deal value for private equity in China tumbled by more than half last year, more than anywhere else in the region.
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