Sequoia and its lead venture capitalist Michael Moritz have got quite a tangle of interests over in China.
Yahoo China (operated by Alibaba.com) has filed a lawsuit against Sanjiwuxian, the owner of a Chinese search engine called Qihoo, on grounds of unfair competition. Qihoo is backed in part by Sequoia Capital.
Qihoo’s software has been telling users that Yahoo’s toolbar is malware and prompts deinstallation, according to the lawsuit, and has taken a cut of Yahoo toolbar’s market share. (Ironically, points out John Battelle, a search for “Qihoo” in Google produces the spelling correction “Did you mean: Yahoo?”.)
Sequoia Capital, an early backer of Google, where Moritz is on the board, helped pour $20 million into Qihoo, which we reported here. Google’s getting some indirect help here, if Qihoo is badgering Yahoo. Finally, remember that Moritz made his name by backing Yahoo. Eventually, he faced conflict while on the boards of both Google and Yahoo, and had to leave Yahoo’s board to resolve it.
Update: There’s an unconfirmed yet interesting comment below suggesting there may be more to this. And we forgot to mention Sequoia poached Fan Zhang, a former director of DFJ’s China operations, who’d helped invest in Baidu, the other big search player in China. So it is full circle.
5 Comments
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zorochina said:
there is so much more to this story, and to the underlying animosity between yahoo/alibaba/jack ma and qihoo/xhou hongyi.
when zhou hongyi was head of yahoo china (after they bought his malware/spyware company 3721), he tried to convince yahoo us to give his team access to yahoo’s search technology. not being complete idiots, they would not. so zhou set up his own search group, and of course yahoo started to help him improve the work of that team. near simultaneously, zhou, likely under his wife’s name, invested in a small, struggling company–qihoo’s corporate parent. that alone was a violation of his non-compete. he had one of his yahoo china lieutenants leave and go join qihoo as ceo. and he either laid off and/or encouraged the core yahoo china search team–the folks who had been learning on yahoo’s dime and with some yahoo tech help–to leave yahoo china, and coincidentally qihoo hired them all.
when zhou left yahoo china, he laid low (for him) at idg ventures, but he was already chairman of qihoo. he got idg and sequoia china to invest 20m into qihoo. i do not believe the sequoia us guys have any say on the china deals, and they may have not known anything. the sequoia china folks on the deal (led i believe by neil shen) knew the history and exactly what they were getting into.
Qihoo is now raising another round, asking for a USD 80M pre-money valuation. They are pitching themselves as a discovery engine with particular expertise around blog and bbs search. They compete directly with the search/portal portion of Alibaba/Yahoo China.
So Sequoia has funded a company that basically misappropriated Yahoo’s assets to go compete directly with Yahoo in China. Nice.
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CHINAVCPUNDIT said:
IMHO, the Sequoia Capital gang is either stupid or unethical. I’d bet on unethical. They’re a perfect match for playing in the China market.
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DXP said:
3721 was a leading local chinese search company before Baidu emerged as the category leader. It’s a bit presumptuous and very American to think that because Yahoo had leading English search technology therfore it automatically has Chinese search technology. Yahoo’s English search isn’t even that good when you look at their subsequent need to acquire Overture, etc. and how Google has easily surpassed them. To call 3721 a malware/spyware is just mudslinging. How silly does Yahoo look for buying junk, if that’s what you are calling it. Give Zhou a bit more credit no matter how distasteful that may be to you. The search/portal portion of Alibaba is so miniscule in China. Alibaba is a B2B company and they own TaoBao, which competes more with eBay on the C2C side. This fight is expected when you cross an English teacher (Ma) with a engineer (Zhou). If Yahoo really is the master with leading Chinese search technology in it’s DNA, they wouldn’t worry so much and launch a lawsuit over a student they say only brought malware/spyware to the table. Sequoia Capital China stupid? Hardly, given their local partners impressive track record. They were the ones behind CTRP, BIDU and KONG to just name a few.
3 Trackbacks
7:10 am
VentureBeat Wire » Sequoia backs Google competitor Guruji, in India said:
[...] As mentioned before, Sequoia has invested in a number of competitors to Google, including Qihoo in China. As also noted, Sequoia has drastically reduced its ownership of Google shares over the past year, so that the conflict has minimized — although Sequoia’s Michael Moritz still sits on the Google board. VentureBeat Community [...]
11:28 am
VentureBeat » Yahoo China hits back at Qihoo nemesis said:
[...] This isn’t helping Qihoo, which is reportedly trying to raise another round of funding at a high valuation of about $80 million. Its main backer, Sequoia Capital, had a few conflicts in China too. Sequoia was a big backer of Google, which is now a competitor to Qihoo. It was also an original backer of Yahoo. However, it’s not clear how much the U.S. Sequoia team is involved in the Qihoo deal. Sequoia’s Chinese office has been the main liaison with Qihoo. [...]
4:44 pm
VentureBeat » With Internet growth slowing in U.S., Sequoia pours more funds into China said:
[...] are looking abroad, and China is a favorite. Sequoia has invested in several companies there, from search engine Qihoo, to video advertising company CTS Media, and petrochemical research company, Accelergy. It has [...]