Sequoia drops Yale after refusal to invest in Asian funds

Yale University has reportedly said that Sequoia severed its relationship with the $18 billion endowment after it declined to invest in some of the firm’s newer, Asian vehicles.

Yale University’s lack of interest in several Sequoia Capital funds targeting later stage deals in China and Israel prompted the venture firm to drop the institutional investor, according to The Wall Street Journal.

The Menlo Park-based Sequoia decided to “oust Yale from its partner group”, according to an internal Yale memo seen in part by the Journal.

The memo said Sequoia wanted investors to write the firm a “blank cheque” to invest as it saw fit. Sequoia partner Doug Leone did not respond specifically to the Yale memo, but told the Journal that his firm does not put pressure on its LPs.

“We encourage our limited partners to invest only in the funds they believe in,” Leone said.

The Massachusetts Institute of Technology issued a statement defending the VC firm, saying that it has “on more than one occasion declined to invest in name brand venture capital firms’ affiliated products that did not match our portfolio requirements” and “we continue to maintain excellent relationships with those firms”.

“The suggestion that MIT has been coerced into investing in any fund is ridiculous,” MIT Investment Management Company managing director Phil Rotner wrote.

Sequoia funds have been extremely lucrative for LPs in the past. The firm has earned impressive returns on its investments in recent years, including a 44 times return from the sale of YouTube to Google, making spaces in Sequoia funds extremely attractive. As such, the firm has been able to be selective in choosing its LPs, and has forced out other prestigious universities before.

In 2003 after the Supreme Court ruled that the University of California had to disclose information about its pension plan’s investments, Sequoia canceled UC’s commitment to its latest fund and asked UC to sell its holding in 10 other Sequoia funds. Sequoia did the same to the University of Texas Investment Management Company and the University of Michican when they were required to disclose similar information earlier that year.

Sequoia recently closed its third India fund on $300 million. Princeton University and Duke University were among the fund’s investors.