Sequoia Capital has come under scrutiny by the U.S. Congress for splitting off its China business.
Sequoia isn't new to controversy, as its China business has come under scrutiny in recent years. Now, the U.S. House Select Committee on the Chinese Communist Party wants to investigate Sequoia's funding of China's military advancement.
A bipartisan letter by Republican Representative Mike Gallager of Wisconsin and Democratic Representative Raja Krishnamoorthi of Illinois has asked Sequoia to share the details about its investments in Chinese companies while criticizing the fund contributing towards human rights abuses.
"Sequoia Capital China has also invested in companies that facilitate the CCP's human
rights abuses, such as sanctioned PRC drone maker DJI, whose products enable the repression and genocide of Uyghurs in Xinjiang," the representatives said in a joint letter sent to Sequoia.
Newsweek reached out to Sequoia Capital for comment.
With its headquarters in Menlo Park, California, Sequoia has funded some of the most cutting-edge technology companies around the world. Sequoia specializes in early and growth stage investment into private technology companies with the potential of becoming the next $1 billion unicorn.
Sequoia has invested in leading Chinese companies, such as drone maker DJI and Bytedance while making a fortune from its investment in China's most profitable companies. But Sequoia's investment record has grown murky as the company has invested in companies now working for the People's Liberation Army (PLA).
A report published in February by Georgetown University's Center Security and Emerging Technology assessed that Sequoia's China subsidiary had carried out "104 investment transactions that Chinese AI companies raised from 2015 to 2021."
Sequoia has invested in the artificial intelligence company 4Paradigm which is one of the contractors of the PLA. As recently as 2021, Sequoia helped 4Paradigm raise an additional $700 million in Series D funding despite growing attention on the company's links to the PLA. The scale of Sequoia's original investment in 4Paradigm isn't publicly available.
Sequoia China is headed by Neil Shen, who once described the company's internal investment database built over 40 years as the "most important competitive power." In 2018, Shen was being considered to lead the global business of Sequoia when the company hosted its biennial investor conference in Beijing with a dinner held at the Chinese government's Great Hall of the People.
Kurt Campbell, President Joe Biden's top Asia official, had confronted Sequoia's top executive Don Vieira in Washington in June, according to The Wall Street Journal. The publication reported that Vieira told Campbell that Sequoia China doesn't invest in defense companies and that Seqouia's U.S. office has no control over its China unit's investments.
Vieira's response didn't satisfy the questions about the nature of the company's investments in China.
In June, Sequoia split up the China and India business from the U.S. to cushion the blow from U.S.-China tensions on its overseas investments. However, the two members of the Select Committee aren't pleased by Sequoia's decision to spin off its China business into a separate entity.
"[S]plitting off its China business ... is a step in the right direction. However, additional questions remain regarding how the split may affect flows of U.S. capital and flows of technological know-how from U.S. companies to foreign venture funds." said the joint letter.
Similar to Sequoia, GGV Capital, another venture capital firm, has decided to cushion its China business from its parent entity in the U.S. as scrutiny in Washington over investments in China's military-industrial complex continues.
On Wednesday, Federal Bureau of Investigations's Christopher A. Wray and his counterparts from Five Eyes countries launched the first Emerging Technology and Securing Innovation Security Summit at Stanford University
The Five Eyes heads of agencies made the first-of-its-kind collective statement bringing attention to China's government-led campaign to intellectual property developed by the U.S. and its allies.
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About the writer
Aadil Brar is a reporter for Newsweek based in Taipei, Taiwan. He covers international security, U.S.-China relations, and East Asian ... Read more
