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Having a permanent capital structure may allow employees with equity in portfolio companies to tender their shares for shares in the Sequoia Fund itself. Presum

Having a permanent capital structure may allow employees with equity in portfolio companies to tender their shares for shares in the Sequoia Fund itself. Presumably those would be much more liquid.

caust1c 5y ago
I think the SEC would have something to say about this unless the exercised options made the individual an accredited investor ipso facto. Edit: But maybe that doesn't apply to selling shares on the private market, only buying? Also if it's written into the initial option grant, perhaps that's a way out too.
- someguydave 5y ago
  I don’t think you need to be an accredited investor to sell, only buy.
pdog 5y ago
Good luck trying to get Sequoia to accept common shares from employees in exchange for diluting their own capital, when they already get preferred shares in a different class through their investments in individual companies.
- dcolkitt 5y ago
  When Sequoia expands their AUM they make more money because they have more assets to collect fees on. This mechanism expands their AUM every time they tender shares. Sure common stock has a discount to preferred stock, but it's not an infinite discount, and it's mostly applicable in the pessimistic scenario. If employees are exercising their options, it's usually because the portfolio company in question has performed well. Sequoia would most likely be happy to acquire shares in those companies at reasonable discounts to preferred, which would make both parties happy. With a permanent capital structure, the most logical thing to do is for them to keep levering up positions in their winning positions.
  - someguydave 5y ago
    Plus, if those employees get Fund shares and sell them back to Sequoia for cash, that opens up room for more investors to enter the Fund without any dilution. I can imagine some closed growth funds might have a hard time finding sellers.
- deleted 5y ago
  [deleted]
svnt 5y ago
I have never observed this level of optimism in the wild before.

Having a permanent capital structure may allow employees with equity in portfolio companies to tender their shares for shares in the Sequoia Fund itself. Presumably those would be much more liquid.

caust1c 5y ago

I think the SEC would have something to say about this unless the exercised options made the individual an accredited investor ipso facto. Edit: But maybe that doesn't apply to selling shares on the private market, only buying? Also if it's written into the initial option grant, perhaps that's a way out too.

someguydave 5y ago
I don’t think you need to be an accredited investor to sell, only buy.

pdog 5y ago

Good luck trying to get Sequoia to accept common shares from employees in exchange for diluting their own capital, when they already get preferred shares in a different class through their investments in individual companies.

dcolkitt 5y ago
When Sequoia expands their AUM they make more money because they have more assets to collect fees on. This mechanism expands their AUM every time they tender shares. Sure common stock has a discount to preferred stock, but it's not an infinite discount, and it's mostly applicable in the pessimistic scenario. If employees are exercising their options, it's usually because the portfolio company in question has performed well. Sequoia would most likely be happy to acquire shares in those companies at reasonable discounts to preferred, which would make both parties happy. With a permanent capital structure, the most logical thing to do is for them to keep levering up positions in their winning positions.
- someguydave 5y ago
  Plus, if those employees get Fund shares and sell them back to Sequoia for cash, that opens up room for more investors to enter the Fund without any dilution. I can imagine some closed growth funds might have a hard time finding sellers.
deleted 5y ago
[deleted]

svnt 5y ago

I have never observed this level of optimism in the wild before.