Updated

china2.jpgSequoia Capital, the well-known Silicon Valley venture capital that backed Cisco, Yahoo, Google and others, has reportedly raised a $200 million China fund — a significant development for the firm that has long focused mainly on the U.S. and whose former leader has publicly dismissed China as being in the midst of a huge bubble.

We haven’t confirmed it 100 percent yet, but we’ve got a source telling us this. Sequoia is famous for not responding to press inquiries, so we’re unlikely to get any confirmation from them. But Sequoia’s leader Mike Moritz was in Israel on Thursday, and an interview was published today in TheMarker.com, in which we’re told he said Sequoia will soon announce the fund. Sorry, no English language translation as yet. Sequoia held a meeting with…

…its investors in NY on Tuesday.

It is true that Sequoia has invested in Israel, but that had seemed and exception • and safe, considering the deep ties the U.S. has had with Israel for decades and that many firms have investments there. Sequoia has an office in Herzlia, and recently raised about $185.7 million for its third Israeli fund.

But as we reported recently, Skype is one more example underscoring how it is time Silicon Valley firms step out of their relative cocoon here. We noted the hiring last month by Sequoia of Neil Shen. But still, the move is in marked contrast to the dismissal just last year by Sequoia’s erstwhile leader, Don Valentine — and which is why we await confirmation before we fully believe it.

Check out what we reported a year ago on Valentine’s comments about China:

…Valentine did go on the SV Bank trip to China, but the experience only confirmed his view that Sequoia should stay away from direct investments there, he said. Indeed, Valentine ragged on China all evening long. Summing up his views about the rush by others to invest China, he quoted the title of a song from 1950’s jazz singer, Billy Eckstine: “Fools rush in where angels fear to tread.” He continued: “China has no laws, no accounting system, bankruptcy banks, and according to Fortune, a stock market that is made up of a den of thieves no different from the ones on Wall Street.”

Valentine said Sequoia hasn’t invested abroad in its 30-plus year history, and it’s unlikely to begin doing so. Even investing in a Boston company is a big deal for Sequoia, he said, and most of our investments are not only west of the Mississippi, they’re west of the California border, he said. Concluding with a bang, Valentine prophesied about China: “You’re about to see a bubble burst in the next five years, or sooner, that will make our bubble look meaningless.”

Kind of sounds like Valentine’s warning to his firm’s partners back in 1999, when they raised a fund to invest in pre-IPO companies at the top of the bubble, doesn’t it? And they lost their shirts. (See the link to our 2001 story at the bottom of this entry).

But if it’s true, how long it will be before Kleiner Perkins — another Silicon Valley firm that remained focused on Silicon Valley — announces a China initiative? And you can bet that there will be scores of other firms that then follow. We remember talking with retired Kleiner partner Tom Perkins a couple of years ago, who told of how he’d prodded his colleagues at Kleiner to think about international expansion, but that they’d shrugged it off. We’ll see what happens this time.

Update: See comment below. Says Sequoia has hired Fan Zhang, a former director of DFJ’s China operations. He’s been pretty active, and if he’s any reason why DFJ got access to the Baidu blockbuster, no wonder Sequoia has gone after him. Another juicy little personnel battle in China? (We found an bio here on DFJ’s ePlanet Ventures Web site for Zhang, though it isn’t linked to from the main page.)