Photo Credit: Malva Nieto
US investment firm and TikTok funder Sequoia is facing Congressional scrutiny over its investments in China.
Silicon Valley-based investment firm Sequoia Capital is facing government scrutiny over its Chinese investments, including ByteDance-owned TikTok. Congress has sent a request to the firm to detail how it will “prevent further US investment dollars from advancing Chinese interests,” as per a recent Executive Order.
Earlier this year, Sequoia announced its plans to split into three entities — Sequoia Capital in the US and Europe, Peak XV Partners in India and Southeast Asia, and HongShan in China, formerly Sequoia Capital China. The company claimed the restructuring was to address the “increasingly complex” nature of running a decentralized global investment business, but some government entities saw it as thinly veiled preparations for an expected legal requirement to divest from Chinese business.
The Select Committee on the Chinese Communist Party, headed by Mike Gallagher (R-WI), would like legal assurance that Sequoia is splitting up and whether that will adequately prevent US dollars from funding Chinese interests in technology sectors, including quantum computing and artificial intelligence.
“Although Sequoia’s split appears to resolve some of the concerns detailed above by curtailing the flow in some cases of US managerial and technological expertise to problematic PRC companies, significant questions remain,” the committee’s letter reads in part, with questions including whether the split could paradoxically exacerbate investment in tech industries by enabling HongShan to act without the oversight of its US counterpart.
The committee’s letter requests that Sequoia list all companies in which it has invested that are based or have significant operations in China, as well as numerous details, including ownership and Chinese government interest. It also asks for more information on the reported 50% of Sequoia Capital China’s US-based limited partners and how they have invested.
Further, the letter asks how Sequoia would respond should the US put one of its portfolio companies on a sanctions or trade restriction list. The committee directs Sequoia to respond by November 1.
Data from TechCrunch reports Sequoia Capital China had already scaled back its capital deployment within the country before the split, having recorded 62 deals between Q3 2022 and Q2 2023, compared to 177 deals during the same period the previous year.