With Internet growth slowing in U.S., Sequoia pours more funds into China

Updated

Silicon Valley’s top venture firm Sequoia Capital is raising what appears to be a massive amount of funding for companies in China, according to VentureWire (sub required), citing filings by the firm with the Securities and Exchange Commission.

Sequoia is a secretive firm, and hasn’t announced anything, but the filing says a Sequoia fund for early stage Chinese companies, its second, now totals $220.5 million, and it may raise more for a final total of $225 million. Sequoia’s first fund there, raised in 2005, totaled $200 million.

The firm has also raised $429.75 million for a “Growth Fund,” or for investing more mature Chinese companies, and may raise more, for a total of $450 million, according to the filing.

That amount is larger than any other U.S. venture capital firm in China — at least that we’re aware of.

Everyone knows that China and India are highly likely to continue to see stronger economic growth rates than the U.S. — especially online.

Since the Web’s beginning, online commerce in the U.S. has seen annual sales increase at more than 25 percent, but that rate has peaked, and will slow over the next decade, according to Jupiter Research statistics sited in by the NYT story over the weekend.

Increasingly, investors 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 aggressively poached investors from other firms there, including Fan Zhang, a former director of DFJ’s China operations

Sequoia’s moves are also significant because of its high profile. Other firms in the valley may follow its lead. Most recently, Kleiner Perkins, another top firm, moved to invest in China, after years of hesitation.

Update: There’s a good series about China’s growth, and its enormous environmental challenges, in the Mercury News. The first piece quotes Eric Straser, partner at Silicon Valley’s venture firm Mohr Davidow Ventures: “The question of the century is: Can China industrialize in a way that does not crush the planet?” The second piece delves more into the huge market for environment-related investments. It cites Gary Rieschel, a VC who once was based in the U.S, but who relocated to Shanghai: “Silicon Valley has a huge play here.” There are links to other articles in the package, too.