Within VC circles, WhatsApp’s $19B acquisition stands out not just due to its sheer size but also because it included just a single outside institutional investor, Sequoia Capital.
To analyze just how rare Sequoia’s feat was among notable U.S.-based VC-backed tech exits, we dug into CB Insights data and looked at the number of VC investors in the 100 largest venture-backed tech exits since 2009 to date. The data below.
Number Investors in Top 100 U.S. VC-Backed Tech Exits Since 2009
The chart below highlights the number of institutional investors (VC firm, corporate venture, hedge funds, mutual funds, etc.) in the top 100 largest venture capital-backed tech exits since 2009. 44 counted between two and five investors, while 28 of the top M&A or IPO tech exits counted between six and nine investors.
And based on the data, just 7 of the companies including WhatsApp saw a single venture capital firm as the only institutional investor in the top 100 largest tech exits since 2009.
Rob Go of Nextview Ventures commented about the VC Lean In and why Sequoia’s feat was so remarkable here. The post is worth reading but a few highlights he offers on why VCs don’t go it alone and lean-in to their big winners as Sequoia did are below.
Most VC’s buy their ownership in a company relatively early. They would like to increase it over time in their winners, but they also like getting external validation that they have made a good investment by getting another firm to mark-up their investment. Basically, this means that another VC invests at a higher valuation, making the early VC seem really smart and able to show unrealized gains. This tends to make LPs happy and make the lead partner look good among his or her colleagues.
Most VC’s like having some leverage on their dollars. They like to share risk with other investors in case things go sideways. It’s comforting to be able to maintain ownership by putting in $X, while someone else provides capital to the company by putting in $5X. It’s also nice to have some other deep pockets beside you in case things go wrong, or markets turn sour.
Rob’s logic is sound except when talking about a AAA VC firm like Sequoia Capital or a handful of other top vigintile (5%) firms. They don’t need external validation from others and given fund sizes, they have deep pockets to go it alone. On the validation side, the point Rob makes is very appropriate and true for other firms. In fact, we’d posit that many firms look for investment validation by having a Sequoia in their round.
A list of the seven top VC-backed tech exits that counted just one investor can be found on the ‘Research’ tab, after logging in to CB Insights. Note: This research is only available to subscribers with access to CB Insider.