Sequoia Capital raises $195 million for its newest seed fund

Sequoia wants you to know: It’s on the hunt for seed deals.

That was the closing sentence Sequoia Capital Partner Alfred Lin left me at the end of our Zoom conversation earlier this week. 

While its largest bets in the likes of Robinhood and SpaceX have dominated headlines in recent months, the Sand Hill Road investing shop wants to emphasize that yes, it is a seed-investing shop too. The firm raised $195 million for its latest U.S. and Europe-focused seed fund, announced Thursday. A successor to the 2018 vintage Sequoia Scout III, Sequoia Capital U.S./E Fund IV plans to make roughly 10 to 20 investments per year in fledgling startups and founders.

“I wanted to get the word out there that we do make seed investments and that is the primary thing. It’s easy to look at [our recent] large deals and say, ‘Oh, Sequoia is doing these larger deals.’ But let’s not forget, we’ve always been in the seed business,” Lin said. 

Lin, who coleads Sequoia’s early-stage investing practice alongside Roelof Botha, pointed to Sequoia’s investment in Apple, which was a seed investment. 

While Lin says the new fund does not represent a shift in strategy, it comes as the firm itself has gradually ramped up its seed investments too: In 2019 and 2020, Sequoia made more investments in the companies at that stage than in Series A investments. In comparison, Sequoia Partner Mike Vernal noted in a blog post, the number of investments in seed and Series A deals had ramped up to become nearly equal in the years leading up to 2018. 

It’s no surprise Sequoia wants the word out there that it is an active seed investor. While the dollars are small and the risk is high, seed investments have become some of the firm’s most lucrative bets in recent years. The IPO of home-sharing startup Airbnb offers a timely example: Sequoia began investing in the company at its seed round in 2009, pouring in nearly $270 million total over multiple rounds of funding. That stake is now worth an estimated $16.4 billion. Other Sequoia seed-stage bets including Stripe and Brazilian fintech Nubank also look poised to add to the fund’s successes if their private market valuations hold.

It’s not a phenomenon limited to Sequoia. Many funds are now trying to invest across all stages for a chance at the most competitive of deals. Funds like Coatue, better known in the past for their growth stage investments, have created early stage funds in the hopes of identifying the most promising startups as early as possible. And venture capital firms like FirstMark Capital have more recently moved into special purpose acquisition companies that help businesses go public.

Sequoia is aware that venture capital in general has become an increasingly competitive market, even as the firm’s string of successful exits in companies including Doordash (which Sequoia first invested in at the Series A) in the past year have cemented its status. The firm tries to think as if it is constantly on its toes, says Lin.

“Nobody thinks we’re the underdogs. But inside of Sequoia, we really try to think of ourselves as the underdog,” says Lin, pointing to a company-building crash course the firm recently developed for founders. “We try to constantly think about how the world is evolving.”

With a team that has a history from robotics to health care, Sequoia’s seed deals have been a broad set too. In recent years, it’s led seed investments in the likes of financial tech company Vise and data management platform Aquarium. But many of those investments also remain under wraps: While Sequoia has made seed-stage investments in some 43 companies in 2019 and 2020, about two-thirds of those deals have yet to be revealed.

It can’t go unsaid that Sequoia has faced criticisms along with much of the industry for a lack of diversity within  portfolio companies—a call that has become ever louder since last summer. Lin acknowledges the issue and says the firm is actively looking to address it.

“We need to do better on the diversity front and we have been trying to reach out,” says Lin, adding that to increase the deal flow from underrepresented areas, partnerships are needed to build out those pipelines. “We have a partnership with BLCK VC and another with the Valence network. We have added a number of scouts that are black and brown and of different ethnicities. We are constantly trying to expand our network.”

A BILLION DOLLAR CORPORATE GOVERNANCE DEAL: Insight Partners-backed corporate governance software maker Diligent acquired Galvanize, a Canadian developer of risk and compliance software, for $1 billion. Norwest Venture Partners last invested $50 million in Galvanize. 
Why does this deal matter? Well, CEO of Diligent Brian Stafford sees corporate governance software as the next big thing in enterprise software, rising one day to the level of Salesforce’s success. Read more.

Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com

VENTURE DEALS

- Yuanfudao, the Chinese live-tutoring app, is in talks with investors to raise at least $1 billion, per Bloomberg. Investors in talks have included Boyu Capital and DCP Capital. Read more.

- Hopin, a London-based virtual events platform, is looking to raise $400 million in Series C funding at a pre-money valuation of $5 billion, per TechCrunch. Andreessen Horowitz and General Catalyst are thought to be potential leads in the deal. Read more.

- Wallapop, a Spain-based marketplace for selling used and hand-made items, raised €157 million ($191 million) at a €690 million ($840 million) valuation. Korelya Capital led the round and was joined by investors including Accel, Insight Partners, 14W, GP Bullhound, and Northzone. Read more.

- BetterUp, a San Francisco-based professional coaching startup, raised $125 million in Series D funding, valuing it at $1.7 billion. ICONIQ Growth led the round and was joined by investors including Lightspeed Venture Partners, Threshold Ventures, Plus Capital, Salesforce Ventures, Sapphire Ventures, and Mubadala Capital. 

- WuXi Diagnostic Investment, a Shanghai-based diagnostics company, raised $150 million in Series B funding. Investors included Thermo Fisher Scientific, Shiyu Capital, ABC International Holdings Limited, Sunland Capital, CCBI Tech Venture, and YF Capital.

- Pliops, a Tel Aviv-based storage tech company, raised $65 million. Koch Disruptive Technologies led the round and was joined by investors including NVIDIA.

- Elevate Brands, a New York-based acquirer of Amazon third-party businesses, raised $55 million. Investors included FJ Labs, Novel TMT, Acceleprise.VC,  Mons Investments, Pandu Sjahrir (from Indies Capital), Adam Jacobs (from the Iconic), and Rob Tarkoff (EVP of Oracle). 

- Madison Reed, a San Francisco-based hair dying and treatment startup, raised $52 million. True Ventures led the round and was joined by investors including Norwest Venture Partners, Comcast Ventures, and Shea Ventures.

- Sorare, a Paris-based maker of a digital collectible football platform, raised $50 million in Series A funding. Benchmark led the round and was joined by investors including Accel, Alexis Ohanian (Reddit co-founder), Gary Vaynerchuck (Vaynermedia CEO), and Antoine Griezmann (FC Barcelona striker). 

- Lob, a San Francisco-based direct mail platform, raised $50 million in Series C funding. Y Combinator Continuity led the round.

- Emotive, a Los Angeles-based text message platform for ecommerce brands, raised $50 million in Series B funding. CRV led the round valuing the business at $400 million. Other investors included Mucker Capital, TenOneTen Ventures, Stripes, and Vulcan Capital. 

- Malta, a Cambridge, Mass.-based energy storage company, raised $50 million in a Series B funding. Proman led the round and was joined by investors including Dustin Moskovitz, Alfa Laval, and Breakthrough Energy Ventures.

- VidMob, a New York City-based analytics platform provider, raised $50 million in Series C funding. Investors included Adobe, Shutterstock, Drive by DraftKings, the Spruce House Partnership, Prefix Capital, BuildGroup, Interlock Partners, and Macanta.

- Otter.ai, a Los Altos, Calif.-based collaborative note-taking platform, raised $50 million in Series B funding. Spectrum Equity led the round and was joined by investors including Horizons Ventures, Draper Associates, GGV Ventures, and Draper Dragon Fund. The round includes a $10 million convertible note.

- Redox, a Madison, Wis.-based healthcare data company, raised $45 million in Series D funding. Adams Street Partners led the round and was joined by investors including Avenir, Battery Ventures, .406 Ventures, and RRE Ventures.

- Episode Six, an Austin-based payment processing and banking infrastructure company, raised an additional $30 million. Investors include HSBC, Mastercard, SBI Investment Co., and Anthos Capital. 

- Armorblox, a Sunnyvale, Calif.-based email cybersecurity company, raised $30 million in Series B funding. Next47 led the round and was joined by investors including Polaris Partners, Unusual Ventures, and General Catalyst.

- Medisafe, a Boston-based digital therapeutics company, raised $30 million in Series C funding. Sanofi Ventures and ALIVE Israel HealthTech Fund led the round and were joined by Leumi Partners, Menorah Mivtachim, Consensus Business Group, Pitango Ventures, 7wireVentures, Merck Ventures, Octopus Ventures, lool HealthTech, Triventures, and Ourcrowd.

- Dispo, a Los Angeles-based photo-sharing app, raised $20 million in Series A funding. Spark Capital led the round valuing the firm at $200 million, per Axios. Read more.

- Bottlepay, a U.K.-based payments company, raised $15 million in seed funding. Investors included Alan Howard, FinTech Collective, and NYDIG.

- Maze, a France-based maker of a rapid testing platform, raised $15 million in Series A funding. Emergence Capital led the round and was joined by investors including Jay Simons (Former President at Atlassian), Amplify Partners, Partech, and Seedcamp.

- Workiz, a San Diego, Calif.-based-based field service management and communication startup, raised $13 million in Series B funding. New Era Capital Partners led the round and was joined by investors including Aleph, Magenta Venture Partners, Maor Investments, and TMT Investments.

- SpineZone, a San Diego, Calif.-based maker of personalized treatment for musculoskeletal conditions, raised $12 million in Series A funding. Polaris Partners and Providence Ventures led the round and was joined by investors including Martin Ventures. 

- Hydrolix, a Portland-based data query company, raised $10 million in seed funding. Wing Venture Capital led the round and was joined by investors including AV8 Ventures, Oregon Venture Fund, and Silicon Valley Data Capital. Read more.

- Nyobolt, a U.K.-based battery company, raised $10 million in Series A funding. IQ Capital led the round and was joined by investors including Cambridge Enterprise.

- Fringe, a Richmond, Va.-based lifestyle benefits startup, raised $4 million in funding. Sovereign's Capital led the round and was joined by investors including Felton Group, Manchester Story, and the Center for Innovative Technology.

- Axis Spine Technologies, a U.K.-based medical tech startup, raised £2.2 million ($3.1 million). ACF Investors’ Delta Fund led the round and was joined by investors including Mercia’s EIS funds.

- Future Fields, an Alberta-based cellular meat startup, raised $2.2 million in seed funding. Bee Partners led the round and was joined by investors including Pioneer Fund, Narrative Fund, and Y Combinator. 

PRIVATE EQUITY

- Francisco Partners agreed to acquire MyHeritage.com, an Israel-based genealogy company. TechCrunch estimates the deal size to be around $600 million. Read more.

- Restaurant Royalty Partners, a joint venture of Oaktree Capital Management and JHR Capital, invested $50 million in Foodtastic, a Montreal-based restaurant franchise operator. 

- RevenueWell, which is backed by Marlin Equity Partners, has acquired PBHS, a provider of accounting, payroll and other administrative services to dental practices. Financial terms weren't disclosed.

- TPG agreed to acquire a majority interest in NewQuest Capital Partners, a Hong Kong-based secondary private equity platform focused on the Asia-Pacific region. Financial terms weren't disclosed.

BANKRUPTCIES

- Belk, the department store chain backed by Sycamore Partners, has filed for chapter 11 bankruptcy, per the Wall Street Journal. Read more.

EXITS

Cornell Capital and Trilantic North America  agreed to acquire Fastaff Travel Nursing and U.S. Nursing Corporation, two nurse staffing organizations. Thomas H. Lee Partners will remain a shareholder in the combined business. Financial terms weren't disclosed.

IPO

- Coinbase, a San Francisco-based crypto exchange, filed for an IPO. Investors include Andreessen Horowitz, Ribbit Capital, and Paradigm. Read more.

F+FS

- Smash Ventures, a Los Angeles-based later-stage investment firm focused on consumer internet and technology companies, raised $75 million for its debut fund. The firm has already deployed some $500 million while in stealth.

PEOPLE