Thursday, September 28, 2023
HomeTECHMichael Moritz leaves Sequoia Capital closing a lengthy chapter.

Michael Moritz leaves Sequoia Capital closing a lengthy chapter.

Michael Moritz has left Sequoia Capital after 38 years to “deepen his advisory relationship” with Sequoia Heritage, the wealth management unit he co-founded in 2010 with colleague Doug Leone and on whose board he has sat for many years.

The change takes effect immediately. In a note to limited partners that we obtained earlier, Roelof Botha, the global managing partner of Sequoia, stated that Moritz will continue to represent Sequoia Capital at a select number of companies, but that these seats will be “transitioned” to other partners over time.

Moritz has long since renounced his day-to-day responsibilities, according to a source familiar with the company. As a result, the development was not shared within the partnership prior to its announcement to Sequoia’s investors. Indeed, he resigned from an active management position in 2012, explaining to investors that he had been diagnosed with a “rare medical condition that can be managed but is incurable” and that “in the next five to ten years, the quality of my life is quite likely to deteriorate.”

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Moritz has remained involved at Sequoia despite the change, with some of his nine board positions being more recent than others. For instance, he serves on the board of Getir, a Turkey-based instant delivery company that Moritz’s family office endorsed in 2020 before Sequoia issued a check.

Instacart, a U.S.-based delivery company; Strava, a social network for athletes; Klarna, a Stockholm-based payment company that last year accepted new funding at a significantly lower valuation than the previous year; and San Francisco-based Stripe, which may prove to be one of Sequoia’s biggest successes to date, are among his other board seats.

In contrast, Botha, who had previously served as the managing partner of Sequoia’s U.S. and European operations, took over Leone’s position as “Senior Steward” of the company last year after about two years of planning.

At Sequoia, separation is frequently a gradual procedure. Leone remains a member of both the seed and growth teams at Sequoia. Jim Goetz, who supervised Sequoia’s U.S. business with Botha until 2017 and who continues to make new investments for the firm from his perch in Miami, Florida, is also a former manager at Sequoia. (After handing over the company’s leadership to Moritz and Leone, firm founder Don Valentine attended partner meetings for ten years.)

However, Moritz will not be making any new investments, which has, perhaps predictably, raised eyebrows in some quarters given Sequoia’s series of recent changes.

In an article published earlier today, the Financial Times quotes a venture capitalist who has invested alongside Moritz and Sequoia as saying that Moritz’s departure could result in a “leadership gap” at Sequoia. “It’s been a long time coming, but it comes at a bad time.”

For one, the startup investment industry is still recuperating from years of excess. Moreover, in one of the most dramatic moves in Sequoia’s history, the firm, which has enjoyed global success, announced early last month that it had decided to split up, with its China, India, and Southeast Asia funds relaunching as separate firms: HongShan and Peak XV Partners.

In an interview with Forbes, Botha and the firms’ two other investment heads, Neil Shen and Sailendra Singh, attributed the decision to conflicts between the funds’ respective portfolios and downplayed a geopolitical environment that has made it nearly impossible for U.S. investors to fund China-specific deals and vice versa.

It wasn’t Sequoia’s only major transition. Prior to less than two years ago, the company announced that it was “breaking with the traditional organization” based on fund cycles and restructuring Sequoia Capital around a single, permanent structure that would allow it to hold public shares long after a portfolio goes public (rather than distributing the shares to its investors) and enable Sequoia to “further increase our investments in emerging asset classes such as cryptocurrencies.”

While the move may be profitable in the long run, its timing was unfortunate. Six months after the reorganization, the broader markets collapsed, driving down the price of public company shares that Sequoia’s investors would have otherwise sold. Sequoia also endured a rare humiliation when FTX, the cryptocurrency exchange in which it had invested more than $200 million, collapsed almost overnight due to mismanagement.

Alfred Lin, a partner at Sequoia, subsequently told this editor that the investment was reasonable from a risk management standpoint, taking into account the $6.3 billion multibillion-dollar fund from which Sequoia’s checks were written. Michelle Fradin, a growth-stage investor who collaborated with Lin on that transaction, has since departed Sequoia in search of an operating position.

There have been additional departures. Two former investors, Kais Khimji and Daniel Chen, have departed to launch two separate artificial intelligence companies, both of which are backed by Sequoia.

Sequoia has a history of supporting its own investors, including David VĂ©lez, proprietor of Nubank. Mike Vernal, a former Facebook vice president who became a partner at Sequoia in 2016, is on leave until the end of the year, according to a source familiar with Vernal’s plans.

Vernal had a more senior position than the others, including helping to supervise Sequoia’s “scout” program, in which founders in its portfolio and their friends are granted the ability to write checks from Sequoia and a portion of any future rewards.

Now, longstanding partners Bryan Schreier and Jess Lee oversee the program alongside Ian Taylor, who joined Sequoia last summer after three years at Pear VC.

Dealbook was the first to report Moritz’s departure, while The Information was the first to report Vernal, Khimji, Chen, and Fradin’s departures.

Sequoia, like any company of its scale and scope, has been recruiting new talent. After more than five years with Coatue Management, David Cahn agreed to join Sequoia Capital as a partner on its growth team earlier this year. Sequoia recently recruited Julien Bek, a principal from Accel, to join its expanding London-based practice.

In the interim, Moritz will not have to travel far to spend time with the Sequoia Heritage team, which was seeded with $150 million from Moritz’s personal funds, $150 million from Leone’s personal funds, and $250 million from outside investors they recruited.

The distinct legal entity is managed by Sequoia Capital’s principal investors, Keith Johnson and Kevin Kelly, and is located in the same building as Sequoia Capital. Sequoia’s hedge fund division, Sequoia Capital Global Equities, also has an office there.

According to a recent Bloomberg article, Heritage was created to collaborate closely with Sequoia, but it has always retained the autonomy to make its own investment decisions. Evidently, it has made some wise decisions, as its assets under management increased from $4.2 billion in April 2018 to $16.4 billion in April 2019.

Separate from Sequoia Heritage and Sequoia Capital Global Equities, Sequoia Capital’s assets have been declining in tandem with the broader startup market. Bloomberg reported that these assets were recently valued at $55.58 billion, according to an SEC filing, compared to $85 billion in March of last year.

Below is the missive that Botha sent to investors early this morning:

We are writing to inform you that Michael Moritz will leave Sequoia Capital on July 19, 2023, after nearly 38 years of service. We are extremely appreciative of Michael’s contributions.

As the firm’s leader for two decades and through his representation of the Partnership in companies such as Yahoo!, PayPal, Google, Zappos, Instacart, Stripe, and Klarna, to name a few, he was instrumental in establishing Sequoia as one of the foremost technology investment firms in the world.

Michael plans to expand his advisory role with Sequoia Heritage, an independent company where he has been a founding limited partner and board member since 2010. Sequoia Heritage is currently a $15 billion global fund with investments in a diversified range of assets and partnerships. It holds a significant portion of the assets of Crankstart, the family foundation of Michael and Harriet Heyman, as well as investments from numerous members of the greater Sequoia community.

Michael relinquished day-to-day administration of Sequoia more than a decade ago but has since provided the Partnership with support and advice.

Michael will continue to represent Sequoia’s interests in a small number of companies where we all have long-standing relationships with the founders and CEOs. Over time, we will collaborate with portfolio companies to transition Michael’s current board seats at Sequoia.

Without Michael, Sequoia Capital would not be what it is today. Personally, he shaped my trajectory by recruiting me to Sequoia in 2003 after taking a chance on me as CFO of PayPal. He has been a mentor and an inspiration to me and innumerable others, and he will continue to be so.

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