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After an initial $8M investment in WhatsApp’s Series A in April 2011, Sequoia put in an additional $52M in July 2013. Sequoia’s well-known trajectory as a Silicon Valley kingmaker and its deep pockets helped it beat out micro-VC fund Felicis Ventures and others for the deal.
In contrast, WhatsApp had expressed a desire to only work with a single firm from the beginning. At exit, lead Series A investor Union Square Ventures owned just 5.9% of Twitter. When firms invest with that kind of conviction, they get a large share of ownership - as opposed to when they join a deal with a crowded field of other VCs.įor example, by the time Twitter had raised $60M, it had brought in well over a dozen outside investors. Sequoia, for its part, signaled its conviction in WhatsApp’s bright future even as the app scaled to hundreds of millions of users with negligible revenue. So it’s not shocking that they chose to cultivate a single VC as an outside source of capital while raising only $60M of outside equity financing. For example, pretty early in the company’s history, they wrote a manifesto against advertising and vowed they would never make money from placing ads in the service and mucking up users’ experience with the app.
WhatsApp’s founders are known to be iconoclastic. Sequoia was the sole investor in the subsequent Series B round as well. WhatsApp and Sequoia Capital followed a different strategy: Sequoia was the sole investor in WhatsApp’s $8M Series A round in 2011, which valued the company at $80M. This is common enough that these rounds are often referred to as “party rounds.” Startups can end up with as many as five or six different VCs in their cap table. Typically when early-stage investors put cash into a company, they want to bring on additional investors to drum up more buzz and validate their investment. Sequoia’s success was built on its exclusive partnership with WhatsApp founders Brian Acton and Jan Koum. It was also a big win for Sequoia Capital, the company’s only venture investor, which turned its $60M investment into $3B. Semiconductor Manufacturing International (SMIC)įacebook’s $22B acquisition of WhatsApp in 2014 was the largest private acquisition of a VC-backed company ever at the time.Earn-outs (such as those that apply to, for example, Stemcentrx) and lockups are not factored into those calculations. Note: Unless specifically stated, the “returns” discussed in the sections below are calculated based on the nominal value of the company at IPO or at acquisition. Below, we’ll show you our analysis on each specific case. To do so, we pulled data and information from web archives, books, S-1s, founder interviews, the CB Insights platform, and more.įor each company, we dove into the remarkable numbers they posted before their IPOs and acquisitions, the driving factors behind their growth, and the roles of their most significant investors. We analyzed 45 of the biggest VC hits of all time to learn more about what those home runs have in common.
Getting valued at a billion or more does nothing for our model.” “If you do the math around our goal of returning the fund with our high impact companies, you will notice that we need these companies to exit at a billion dollars or more. Those wins often make up for all the losses and then some - they “return the fund.”įred Wilson of Union Square Ventures (USV), also a Smart Money VC, has written that, for USV, this translates to needing at least two $1B exits per fund: Likewise, VCs swing hard, and occasionally hit a home run.
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