When Mark Zuckerberg pulled a prank on WhatsApp investor Sequoia Capital

Feb 22 2014, 10:13 IST
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With sale of its protégé company WhatsApp to Facebook, Sequoia Capital solidifies its position as titan of venture capital. (Reuters) With sale of its protégé company WhatsApp to Facebook, Sequoia Capital solidifies its position as titan of venture capital. (Reuters)
SummaryWith WhatsApp, Sequoia finds a way to make money from Facebook and burnishing its reputation.

Shortly after moving to Silicon Valley in 2004, the young Facebook founder Mark Zuckerberg pulled a prank on Sequoia Capital by making an investment pitch in his pajamas.

The discussion never got serious, and Sequoia never invested in Facebook. But now, Sequoia is getting the last laugh.

With the sale of its protégé company message service WhatsApp to Zuckerberg's Facebook for $19 billion, Sequoia found a way to make money from Facebook as well as solidifying its position as a titan of venture capital. And it establishes partner Jim Goetz, who landed the deal, as one of Silicon Valley's top rainmakers.

"This would make a lot more founders want to work with Jim Goetz," said Sam Altman, a partner at Y Combinator, a program for start-up companies whose previous startup was backed by Sequoia.

In a business where top firms come and go, Sequoia has proved remarkably tenacious. Its big wins take on particular significance in an era when venture firms must beat back challenges from individual investors known as "angels" and crowdfunding; new technology that makes early-stage investments less crucial than they once were; and critics who say that venture capital investments aren't worth the trouble.

Facebook announced the acquisition deal on Thursday, astounding many with the price it paid for the service, which has 450 million users and is growing at 1 million a day.

Sequoia, which invested $60 million and made around $3 billion from WhatsApp, according to a source familiar with the situation, has squeezed a considerable sum out of Facebook , even if it never did invest in the social-media behemoth. Sequoia also backed photo-sharing service Instagram, which Facebook bought in 2012 for $1.01 billion.

By contrast, Accel Partners, the biggest venture investor in Facebook, held $7.64 billion worth of Facebook shares at the time of that company's 2012 IPO.

Launched in 1972 by Don Valentine, a founder of National Semicondutor, Sequoia was one of the nation's earliest venture-capital firms. As most others of the earlier generation faded from the scene, Sequoia held its own, going on to fund companies including Apple Inc, Oracle Corp, Paypal, and Google Inc.

Today, it is involved with many of the hottest startups, including accommodation service Airbnb, file-sharing service Dropbox, invitation service Eventbrite, and stereo and bluetooth headset maker Jawbone.

"We were so excited to meet with them," said David Rusenko, co-founder of web-hosting service Weebly, recalling his early interactions with Sequoia before the firm invested in his company

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