Sequoia China to cut up to 20 per cent of its investment staff as fund flows into technology industry and start-ups slow to a trickle

Sequoia Capital China, widely viewed as a bellwether for Chinese tech investment, is set to lay off as much as 20 per cent of investment staff as a slowdown in the country’s tech sector saps appetite for risk, said two people with knowledge of the matter.

The Chinese arm of Silicon Valley venture capitalist Sequoia Capital is looking to cut the number of venture investment professionals from about 70, the people said. Two other people said the cut would be at least 10 per cent.

Sequoia China told Reuters it regularly reviews its workforce which may result in personnel adjustments.

“Within the last 12 months, we had 13 new investment professionals join Sequoia China, which slightly increased our total number of employees,” it said in a statement.

The lay-offs would come after a government campaign against debt financing left start-ups vying for shrinking pools of fresh capital. Meanwhile disappointing returns from firms going public amid market volatility has made investors bearish, resulting in down rounds – where a firm’s valuation in a round of fundraising falls below that of a previous round.

Chinese venture capital and private equity managers raised a combined US$1.5 billion for investment across all sectors in the first three months of 2019, a far cry from the US$9.4 billion of the same period last year, according to data provider Preqin.

Reflecting broader industry malaise, major tech firms have cut headcount and salaries to maintain performance as economic slowdown and US-China trade war weigh on customer sentiment, while at the same time seeking opportunities as growth plateaus.

Sequoia China’s job cuts began in late March and have mainly affected the venture capital arm’s technology & media, health care, consumer and industrial technology teams, two of the people told Reuters, declining to be identified as the information was not yet public.

Investment professionals including one partner, one managing director, and several vice presidents and associates have agreed to leave the firm during these cuts, said one of the people.

The cuts mirror similar moves across the much-hyped tech industry in the world’s second-biggest economy.

In February, ride-hailing firm Didi Chuxing said it would axe 15 per cent of staff, mostly in noncore business units.

The same month, online media outlet Sina Tech said e-commerce firm JD.com Inc planned to lay off 10 per cent of senior executives this year. In March, Bloomberg said gaming and social media leader Tencent Holdings planned to demote or axe about 10 per cent of managers. Neither JD.com nor Tencent responded to Reuters’ requests for comment.

Sequoia China was founded in 2005 by entrepreneur-turned-investor Neil Shen. The firm employs about 150 people in Beijing, Shanghai, Hong Kong and elsewhere in China.

It has invested in over 500 firms in China, including JD.com and bigger rival Alibaba Group Holding – owner of this newspaper – as well as some of China’s fastest-growing firms such as Didi Chuxing, Meituan Dianping and Beijing Bytedance Technology.

It is widely known for expertise in venture capital-type deals, but has been broadening its focus to even earlier-stage seed investment as well as far later-stage funding ahead of initial public offerings.

Last year it raised its first seed fund of US$150 million and its fifth growth fund of US$1.8 billion, the largest of its kind, showed Preqin data.

Its relatively young seed- and late-stage investment teams have been less affected by the lay-offs so far, said two of the people. One of the people said there would be job cuts in the one-year-old seed team in the coming months.