Sequoia makes 44 times return on YouTube(2)

Google has revealed that its acquisition of YouTube last year netted a return of nearly $500 million for Sequoia Capital, the US venture capital firm behind the video sharing website.

US venture firm Sequoia Capital made a return of more than 40 times its initial investment in YouTube, the video sharing website sold to Google for $1.65 billion (€1.3 billion) last year.

According to an SEC filing by Google yesterday, Sequoia’s eleventh venture fund holds 941,027 Google shares as a result of the deal, which was structured as a stock swap for tax reasons. In addition, its Principals fund owns 102, 376 shares, and its Technology fund owns 29,724 shares.

At Google’s current share price, this values Sequoia’s total stake at $504 million. The venture firm originally invested about $11.5 million in YouTube, through two financing rounds, and so has made a return of about 44 times its initial investment.

Sequoia first invested $3.5m in YouTube’s Series A round in November 2005, and then an extra $8 million in its Series B round the following April. This gave it a stake of about 30 percent in the company, which was started in 2005 by Steven Chen and Chad Hurley, two former PayPal executives.

Both Chen and Hurley now own Google shares worth over $300 million, according to the filing. A third founder, Jawed Karim, who left the company before the sale, owns $64 million of shares.

The price paid by Google raised eyebrows at the time, since YouTube was less than two years old, had limited revenues and was yet to make any kind of profit.

Sequoia was also one of the first investors in Google, sharing in a $25m Series A round in 1999 alongside fellow US venture firm Kleiner Perkins Caulfield & Byers.