Sequoia Capital is Silicon Valley’s most respected venture capital firm, having made money from backing Yahoo, Google, YouTube and many others.
Now it emerges that, through reporting of PE Week’s Alex Haislip (sorry the full version is subscription only), that David Lamond, son of Pierre (Pierre pictured here), is an investor at hedge fund Artis Capital. Another family connection, and again, who cares?
Sequoia made a killing off its investment into video site, YouTube when it was sold to Google for $1.6 billion, and eyebrows were raised when it emerged that the obscure Artis Capital had also been in on the investment. Who were these guys? One of its partners has since bought the $20 million Tiburon estate of Andre Agassi. Is it a coincidence that David Lamond, who has been with Artis since at least 2005 appears to have been among the few to benefit from the YouTube investment? And is it a coincidence that since that time, Artis has landed as an investor alongside Sequoia in a surprising number of deals, from Aruba in Sept. 05, to Open Silicon in Oct. 05 and AdBrite in February, to name just a few?
Again, no big deal, unless of course investors in Sequoia’s fund begin to argue that their stakes in companies like YouTube are being artificially reduced because Sequoia is letting in Artis simply for family reasons. We should caution that we know very few facts about the relationships. We contacted both Sequoia and Artis for comment. However, another common thread is that both firms are obsessively secretive. Sequoia did not respond. COO John Milani of Artis, when contacted, told VentureBeat: “We don’t comment on employees or our investments.”
Sequoia took public money from the University of California for decades. While working for the Mercury News, we engaged in talks with Sequoia and other firms in an effort to obtain their financial performance, which we thought the public investors a right to access, especially given the downturn in the economy and in venture capital. UC, CalPERS and many other public-backed institutions had invested in VC firms, and almost nothing was known about the money-losing investments the VCs had made. Notably, Sequoia initially agreed to release its basic data, the so-called Internal Rate of Return, in exchange for an agreement that we not request other, more detailed information about the fund. Two days later, Sequoia reneged on that agreement, and decided to boot the University of California as an investor for its initial decision to reveal Sequoia’s financial performance to the public.
Of course, the public coffers can only profit if a firm like Sequoia does well, and Sequoia did do well (in contrast to most venture firms, which aren’t doing so well). But it’s important that the public be aware if its investments in venture firms are riddled with favoritism, especially if firms aren’t doing well. Pierre Lamond reportedly lost $250,000 from his personal investment in the CKS Group, an ad agency, which was run by Mark Kvamme (pictured here) in the late 1990s. It was also a time when Lamond’s firm was taking money from UC. Even then, Lamond’s son, David, was partaking of Lamond’s investments.
PE Week’s Haislip points out that there is no evidence (yet) that Sequoia’s partners invested in Artis — which would be of concern for Sequoia’s remaining investors. To repeat, we don’t know the full facts on this, but it is a significant reminder that family and relationship ties do matter at a time when many tend to think — quite naively — that meritocracy alone rules in a place like Silicon Valley.