Perpetual funds and VCs: seismic shift or natural progression?

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Hello reader,

Anyone looking to grow their capital needs to have knowledge of finance and investing. But the jargon and data-centric content often scare people off from picking up the basic financial know-how to build wealth securely.

In fact, most people consider finance and investing uninteresting or “dry” topics. Like math, these subjects are loathed by millions. However, I think that’s because of a few unfair misconceptions. The world of finance and investing somehow manages to keep its participants alert and excited.

Whether it’s a startup’s massive funding round, the disintegration of a conglomerate, legal tussles, pressure from activist investors, mammoth M&As, or drastic stock market swings, the space has a lot that keeps its stakeholders deeply engaged.

Today, we put the spotlight on Sequoia Capital’s unique attempt to revamp the VC model of 10-year funding horizons – in use since the 1970s – and ponder over its applicability in Asia.

Today we look at,

• Whether Asia is ready for Sequoia’s perpetual fund model
• A Singapore ecommerce roll-up firm’s US$100 million target for brand acquisitions
• Other newsy highlights such as a US$90 million pampering and Carousell’s brave choice

Also, if you’re an entrepreneur looking for funding, fill out this form to get your company featured on our list of fundraising startups.

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Change for the better, right?

Image credit: Timmy Loen

The Sequoia Fund offers an “open-ended liquid portfolio” in a selection of Sequoia-backed companies. Roelof Botha, a partner at the firm, claims this is the startup investment giant’s “boldest innovation yet”. It allows limited partners (LPs) to participate in a company’s fundraise at any time, from inception to IPO and beyond.

It’s a seismic shift in the world of VCs, where the norm is to invest and ultimately return capital to LPs within a 10-year window. However, is this change revolutionary? Or are these funds better investment options than dividend-paying evergreen funds, which operate indefinitely?

• One size doesn’t fit all: The Sequoia Fund model has so far only been applied in its businesses in the US and Europe. It’s not a strategy that’s used yet for the firm’s operations in India, China, and Southeast Asia. One explanation is that Asia’s startup scene simply isn’t ready for a perpetual funding model. “Our ecosystem is so young,” said a representative of a VC firm that invests in Southeast Asia.

Rewards for (strategic) hoarding