A prominent Silicon Valley venture capital firm has barred the University of California from investing in its latest fund, seeking to shield its closely guarded books from public scrutiny.
Sequoia Capital, which has helped launch high-tech bellwethers Oracle Corp, Cisco Systems, Yahoo! Inc and Google, notified the university of its decision Wednesday. The Menlo Park-based firm, which manages about US$1.6 billion, also asked the university to sell its holdings in Sequioa's other funds.
Because their funds are privately held, venture capitalists have the option to turn away investors.
Sequioa's action stems from a recent push to gain greater access to the closely held books of venture capitalists.
Newspapers and other organizations have been suing publicly controled institutions, such as universities, to obtain the results of their investments in privately held venture capital firms.
The curiosity has been sparked by the huge losses that venture capitalists have sustained during the high-tech downturn of the past three years.
Venture capitalists helped finance the mania that preceded the crash by pouring US$182 billion into startups from 1998 through 2000. Much of that money was provided by universities, pension funds and other institutional investors.
The crusade for greater disclosure has infuriated Sequoia and other venture capitalists, who contend they need to protect most information about their investments for competitive reasons.
With its move, Sequoia is ending a 22-year relationship with the University of California system, which had a US$53.25 billion investment portfolio as of June 30. Just under US$650 million of the university's assets -- slightly more than 1 percent of the total portfolio -- was held in venture capital funds.
The university's partnerships with Sequoia Capital have been extremely profitable.
The University of California has invested a total of US$110 million in Sequoia partnerships that generated a US$508 million return, according to a sworn declaration by Treasurer David Russ.
Russ didn't return phone calls on Thursday. He said he was "in mourning" about Sequoia's decision in the declaration, submitted as part of an Alameda County Superior Court lawsuit that triggered Sequoia's rejection.
"Loss of the opportunity to invest in Sequoia Capital's partnerships cannot be replaced by similar productive investments; such opportunities are simply not available," Russ said in the document.
Russ predicted other venture capitalists with privacy concerns will follow in Sequoia's footsteps and lock out the university, costing "the university's funds perhaps billions of dollars in returns."
This marked the second time in two months that Sequoia Capital has spurned money from a publicly run university. Sequoia last month told the University of Michigan to sell its holdings in six of the firm's partnerships.
In both instances, Sequoia linked its decision to a spate of freedom-of-information requests that have led to court rulings requiring publicly controled institutions to disclose the results of their venture capital investments.
A Superior Court judge already has issued a tentative ruling requiring the University of California to disclose the performance of its venture capital investments. The San Jose Mercury News and the Coalition of Union Employees sued to get the information earlier this year.
A freedom-of-information request by the Mercury News prodded the University of Michigan to begin releasing its venture capital data in February.
Sequoia concluded the risks of having its books exposed weren't worth keeping the University of California as an investor, according to a letter sent to the school by Michael Moritz, a partner at the firm.
"We are utterly resolute in our belief that it is not in the interests of Sequoia Capital's other clients that we be hounded, badgered and stalked by entities wishing to either profit from or publicize our private and confidential information," Moritz wrote.
He didn't return calls Thursday.
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