Sequoia Capital’s Early Dropbox Bet Pays Off With $2 Billion Stake

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(Bloomberg) -- As Sequoia Capital tries to raise as much as $12 billion to invest in mostly mature companies worldwide, the firm’s biggest wins continue to come from early bets on small startups.

The venture capital firm is poised for a big payday after Dropbox Inc. begins trading on Friday. Sequoia Capital started with an investment in a $1.2 million round more than a decade ago. Today the firm’s holdings are valued at about $2 billion.

The first meeting between Dropbox and a Sequoia Capital partner took place before the two-person startup even had released a product. The VC firm bought in at a valuation of a few million dollars, and by the time Dropbox went back for more money in 2011, investors placed a $4 billion value on the business.

Investors who came later to Dropbox, including Benchmark and Greylock Partners, may double their money after the IPO. That’s not great by venture capital standards. But the line between VC and private equity is blurring in the technology industry. SoftBank Group Corp.’s giant Vision Fund is investing billions in private companies young and old, enabling them to accelerate growth by outspending competitors.

Sequoia Capital is expected to play more in the SoftBank arena after a massive fundraising effort the firm has undertaken. Sequoia Capital raised $2 billion for a global growth fund in 2015. Now it’s looking for as much as $8 billion for the next flagship fund, plus another $4 billion or so for investments in China, India and elsewhere, according to CNBC. The website reported that Sequoia Capital will meet with potential investors in Beijing next month.

As it prepares to manage vastly more capital, Sequoia Capital will strive to maintain the same strategy it has had for decades: be early and aggressive. The firm backed Google and Apple Inc. in the first years of their founding and did the same more recently with Airbnb Inc., LinkedIn and WhatsApp.

As it often does, Sequoia Capital turned its early investment in Dropbox into a sizable stake. With 23 percent of Dropbox shares, Sequoia Capital is the second-largest stockholder after co-founder and Chief Executive Officer Drew Houston.

©2018 Bloomberg L.P.

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