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Why Sequoia’s WhatsApp Investment Is Even More Impressive Than it Seems – ROBGO.ORG


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Fourth, regardless of what Sequoia wanted to do, the ultimate decision around a financing is up to the entrepreneurs. Techcrunch’s friday report mentioned that the last round’s financing was done with 3X participation. This means that in a downside scenario, Sequoia would get paid out 3x $50M first, before anyone else, including founders and employees. This isn’t a crazy term given the valuation, but given the traction, there would likely be other potential buyers at that price, and maybe without that kind of preference. But the founders chose to let Sequoia speak for the entire round, even though one could come up with a dozen reasons why it might be beneficial for the founders to diversify their investor base. To name just a few: 1) expand the rolodex of connections 2) expand the capital sources in case things go sideways and more money is needed 3) bring another set of intellectual capital to the table with different experiences, especially with social/consumer internet experience from some of the recent winners (Facebook, Twitter, etc). 4) create an auction for the financing and drive up the price even higher, etc. etc. But ultimately, the founders did not take this path, and chose Sequoia for the entire round. This indicates that the relationship between the founders and the investors was very strong and that there really wasn’t anything lacking that would lead the founders to seek out other capital partners. Again, pretty unusual for a company at that stage.

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