One of Silicon Valley’s most prominent investment firms will face government scrutiny over its investments in China. Sequoia Capital received a polite but specific request from Congress to go into more detail about how it will prevent new U.S. investment from advancing Chinese interests.
Sequoia announced in June that it was split into three parts: Sequoia Capital in the United States and Europe, Peak XV Partners in India and Southeast Asia, and HongShan in China (formerly Sequoia Capital China). While the firm claimed to do so because it was “increasingly complex to manage a decentralized global investment business,” it seemed clear to all that it anticipated a legal obligation to divest from certain sectors of the investment business. activity of the rival superpower.
The Chinese Communist Party Select Committee, led by Mike Gallagher (R-WI), would like assurance that Sequoia is indeed splitting up, and whether that is enough to prevent – as is now required following a recent executive order – US dollars to ultimately fund Chinese efforts in quantum computing, semiconductors, AI and other important technology sectors.
The letter, which can be read heresent to Sequoia, calls the split “not in the right direction,” but adds:
Although the Sequoia split appears to resolve some of the concerns detailed above by in some cases reducing the flow of American managerial and technological expertise to struggling Chinese companies, important questions remain…
These questions are, first, whether the split could potentially and paradoxically intensify investment in banned industries by allowing HongShan to act without the control and oversight of its US counterpart. And second, could HongShan step up its investments in US startups for similar reasons.
The committee’s letter asks Sequoia to list all companies it has invested in that are based or have significant operations in China, as well as numerous details such as ownership, Chinese government interest, decision-making processes, etc.
He also asks for more information about the 50 percent of Sequoia Capital China’s limited partners who are based in the United States and how they invested.
Finally, he asks how Sequoia would respond if the United States placed any of Sequoia’s portfolio companies on a sanctions or trade restriction list.
It is possible that certain information requested is confidential, evolving or simply unknown (notably the last question, which concerns a hypothesis). Nonetheless, the committee asks Sequoia to respond by November 1.
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