As far as venture funds themselves trying to raise their own capital is concerned, this is indeed huge. Sequoia Capital is reportedly seeking to raise $5 billion.
It is being suggested that the reason for Sequoia Capital wanting to do this exercise is that many Silicon Valley startups appear to be getting funded by foreign VCs, not as much as the home-grown US venture funds like Sequoia. The underlying fear is that the tech startups, which have already received funding from such funding institutions, like say, SoftBank of Japan may turn out to be predatory in nature. Sequoia, on the other hand, would want the startups to remain private as long as they want to.
The major objective that Sequoia Capital would want to achieve with its $5 billion fund, as and when it is able to attract investors, will be to ramp up its stakes in the tech companies that is has already invested in. Though the official spokesperson for Sequoia Capital has declined to comment on the development, this particular plan by Sequoia has been in the news earlier as well.
It is believed that if the funds are sourced over the first quarter of 2018, the investments by Sequoia will start in the second quarter. It is also expected that the company may follow a modus operandi adopted by SoftBank, of buying the holdings, in these tech startups, of entrepreneurs and early employees. This would mean paying a higher price, again, a tool used by SoftBank to attract targets.
It is being pointed out that prior to this, the largest venture fund raising capital was $3.3 billion by New Enterprise Associates. But even this $5 billion war chest might appear miniscule in front of SoftBankâs $100 billion technology fund that it has obtained from Saudi Arabia. SoftBank is not strictly a venture capital firm. Firms, like Slack and WeWork, in the technology space have already been funded out of this large reserve.
How the overall dynamics play out in the coming months will be watched closed by all stakeholders, the investors, those raising funds for their tech startups, particularly in the tech space as well as the experts monitoring these developments. One such observer says the risk in choosing companies to invest used to be with the public; now, this risk being taken by the venture capitalists.