Neil Shen, the legendary venture capitalist who built Sequoia’s investing empire in China, is the latest titan to feel the chill winds of Cold War II as China and America slug it out for global dominance. Last week, Sequoia announced that its American, Chinese and Indian venture investing arms would hitherto function as three completely separate companies.
The premise on which Sequoia was built in China was to ally America’s wealth with China’s booming economy. Now however says the FT, “… rising tensions between the two powers have gradually changed how this match was viewed in both Washington and Beijing.
Chinese leaders are less eager to see American investors reaping rewards from their fledgling companies. They want start-ups to prioritise building up the country’s technological base. Meanwhile, the prospect of China catching up is rattling politicians in Washington.
“The degree of paranoia in Washington about Chinese technology is extraordinary,” said one US-based investor briefed on details of the Sequoia split.”
Shen’s career is the stuff of legend. Now at age 55 he’s striking out on his own. Can he raise capital under his new brand ‘HongShan’? That’s another way of asking the question, can China continue to boom without hundreds of billions of Western money.
The FT article gives both side of the answer: “…Shen’s global network and record have made him one of the few China-focused managers still able to land billion-dollar funds as increasingly thorny geopolitics keeps most western investors away. Total funding for China venture and private equity collapsed 80 per cent last year, according to research provider Preqin. But Sequoia China raised nearly $9bn, the largest fundraising in his team’s history, hoovering up one-third of total funding for China.
Still, Fraser Howie, an independent expert on Chinese finance, estimates that the economic liberalisation and boom of foreign money into China since Shen set up Sequoia’s China arm has fundamentally reversed.
“He will be courting capital as a Chinese VC firm, using a Pinyin name as opposed to a US brand name,” Howie said. “His reputation speaks for itself but it will become harder and harder.”“
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