3 ms·

Does all the money made from Sequoia China and India just go right to the top to Sequoia though?

alephnerd 3y ago
> go right to the top to Sequoia They go to the partners managing the individual fund. A VC Fund is basically like a bottle of wine. Each fund raises a vintage, and any profit (or loss) from that vintage is kept within the vintage itself. VCs make money from their operating funds - they charge investors around 1.5-3% (depending on fund size) in Annual Management Fees. That money goes to the staff of the Fund who are operating the vintage to pay for salaries, office space, business expenses, etc. Most VCs end up making way less money than if they remained a PM or Engineer, but the work is intellectually rewarding and upsides/fame can be massive.
- mattmaroon 3y ago
  Bottles of wine are not separately incorporated. A “vintage” of wine is just one product put out by a winery. If one somehow went really bad (like it killed people and lost a big judgement or something else far fetched) it would bankrupt the vintner and the other wines would stop being made. Perhaps a better way to phrase it is that each firm is like a real estate patent corporation and each fund is its own separate but owned corporation, the way commercial real estate companies incorporate every building. If one VC fund lost money, only the LPs would suffer, the firms other funds would still operate independently.
  - alephnerd 3y ago
    > Perhaps a better way to phrase it is that each firm is like a real estate patent corporation and each fund is its own separate but owned corporation, the way commercial real estate companies incorporate every building Great point! Wasn't sure if most readers on HN know that fact though. Though, > Bottles of wine are not separately incorporated is starting to happen in a way. Lots of Wines are just a brandname now with different vintages just being sourced from different growers and fermenters directly, so a no-name Winery could rent out an established brand and it's associated cache
- Mistletoe 3y ago
  >they charge investors around 1.5-3% (depending on fund size) in Annual Management Fees. https://www.sequoiafund.com/performance/ https://www.sequoiafund.com/performance/ Do the numbers here include that 1.5-3% or should it be subtracted out? It looks like they have severely underperformed the SP500 for the last 3, 5, 10 years.
  - alephnerd 3y ago
    That is fund performance, not Asset Managament fees. > It looks like they have severely underperformed the SP500 for the last 3, 5, 10 years. Yep! That was why Sequoia Fund (the US operation and brand owner) had India+SEA and China funds created in the 2010s and why they began restructuring in 2020-23 [0] [0] - https://www.axios.com/2021/10/26/sequoia-capital-fund-venture-capital-model https://www.axios.com/2021/10/26/sequoia-capital-fund-ventur...
mtillman 3y ago
No idea about Sequoia but they tend towards conservative on the legal side of things. Some VC firms license the name so there's a franchise fee which often includes carry and/or fee percentage participation even though there isn't direct ownership.
- alephnerd 3y ago
  > license the name Accel and Sequoia did/do this. Seqouia's got tricky because their US fund is heavily invested in US Sustainability tech, and they were overinvested in China leading to reputational issues for their US fund

> go right to the top to Sequoia They go to the partners managing the individual fund. A VC Fund is basically like a bottle of wine. Each fund raises a vintage, and any profit (or loss) from that vintage is kept within the vintage itself. VCs make money from their operating funds - they charge investors around 1.5-3% (depending on fund size) in Annual Management Fees. That money goes to the staff of the Fund who are operating the vintage to pay for salaries, office space, business expenses, etc. Most VCs end up making way less money than if they remained a PM or Engineer, but the work is intellectually rewarding and upsides/fame can be massive.

mattmaroon 3y ago
Bottles of wine are not separately incorporated. A “vintage” of wine is just one product put out by a winery. If one somehow went really bad (like it killed people and lost a big judgement or something else far fetched) it would bankrupt the vintner and the other wines would stop being made. Perhaps a better way to phrase it is that each firm is like a real estate patent corporation and each fund is its own separate but owned corporation, the way commercial real estate companies incorporate every building. If one VC fund lost money, only the LPs would suffer, the firms other funds would still operate independently.
- alephnerd 3y ago
  > Perhaps a better way to phrase it is that each firm is like a real estate patent corporation and each fund is its own separate but owned corporation, the way commercial real estate companies incorporate every building Great point! Wasn't sure if most readers on HN know that fact though. Though, > Bottles of wine are not separately incorporated is starting to happen in a way. Lots of Wines are just a brandname now with different vintages just being sourced from different growers and fermenters directly, so a no-name Winery could rent out an established brand and it's associated cache
Mistletoe 3y ago
>they charge investors around 1.5-3% (depending on fund size) in Annual Management Fees. https://www.sequoiafund.com/performance/ https://www.sequoiafund.com/performance/ Do the numbers here include that 1.5-3% or should it be subtracted out? It looks like they have severely underperformed the SP500 for the last 3, 5, 10 years.
- alephnerd 3y ago
  That is fund performance, not Asset Managament fees. > It looks like they have severely underperformed the SP500 for the last 3, 5, 10 years. Yep! That was why Sequoia Fund (the US operation and brand owner) had India+SEA and China funds created in the 2010s and why they began restructuring in 2020-23 [0] [0] - https://www.axios.com/2021/10/26/sequoia-capital-fund-venture-capital-model https://www.axios.com/2021/10/26/sequoia-capital-fund-ventur...

mtillman 3y ago

No idea about Sequoia but they tend towards conservative on the legal side of things. Some VC firms license the name so there's a franchise fee which often includes carry and/or fee percentage participation even though there isn't direct ownership.

alephnerd 3y ago
> license the name Accel and Sequoia did/do this. Seqouia's got tricky because their US fund is heavily invested in US Sustainability tech, and they were overinvested in China leading to reputational issues for their US fund