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One of Silicon Valley’s most prominent investment firms will face government scrutiny over its investments in China. Sequoia Capital has received a polite but pointed request from Congress to explain in more detail how it will prevent US investment dollars from furthering Chinese interests.
Sequoia announced in June that it would split into three pieces: Sequoia Capital in the US and Europe, Peak XV Partners in India and Southeast Asia, and Hongshan (formerly Sequoia Capital China) in China. While the company claimed to do so due to “it becoming increasingly complex to run a decentralized global investment business”, it seemed clear to all that this was in anticipation of a legal requirement to divest from certain lines of business in the rival superpower. Was in.
The Chinese Communist Party’s select committee led by Mike Gallagher (R-WI) would like further assurances that Sequoia is indeed being split, and whether it is doing enough to stop – as is now required after a recent executive order – the U. .S. dollars from ending funding of Chinese efforts in quantum computing, semiconductor, AI and other critical technology areas.
Letter, which can be read hereSent to Sequoia, calls the split “a step in the right direction”, but adds:
Although the divestiture of Sequoia appears to resolve some of the concerns described above by reducing the flow in some cases of American managerial and technical expertise to problematic PRC companies, important questions remain…
Those questions are, first, whether the split could potentially and paradoxically accelerate investment in restricted industries by allowing Hongshan to operate without the screening and monitoring of its US counterpart. And second, whether Hongshan might increase its investments in US startups for similar reasons.
The committee’s letter asked Sequoia to list all the companies it has invested in that are based or have significant operations in China, along with details such as ownership, Chinese government interests, decision-making processes, etc. Description is also included.
It also sought more information about the alleged 50 percent partners of Sequoia Capital China Ltd who are based in the US and how they have invested.
Finally, it asks how Sequoia would respond if the US placed one of Sequoia’s portfolio companies on an sanctions or trade embargo list.
It is possible that some of the information sought is confidential, in flux, or simply unknown (especially the last question, which is a hypothetical concern). Nevertheless, the Committee directs Sequoia to respond by November 1.
