How Sequoia Capital China is helping its portfolio startups get through the Covid-19 crisis

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The renowned investor is also making big bets on the opportunities that lie head

On April 12, Sequoia Capital China announced it had set up a RMB 10m ($1.4m) fund to donate medical supplies to overseas hospitals amid the Covid-19 pandemic. The first batch of donations, including personal protective equipment (PPE), had already arrived in the US as of that day. Recipients included Stanford Health Care, Yale New Haven Hospital, Cleveland Clinic, Memorial Sloan-Kettering Cancer Center, and Partners HealthCare. More medical supplies are on the way to other countries hit by Covid-19.

This is only the latest contribution by the VC firm to the coronavirus fight. As early as January 26, Sequoia Capital China, among the first companies responding to the crisis, had already set up a RMB 10m Covid-19 relief fund and sent its first batch of medical supplies to Wuhan, the worst-hit city in China.

Within its own network, the VC has also had its portfolio companies in mind, particularly those early-stage ones more vulnerable to such an unexpected crisis as Covid-19. While encouraging them not to lose hope, the investor has also warned them of upcoming problems. 

“I went through SARS in 2003 as the founder of Ctrip and Homeinn, so I fully understand the challenges entrepreneurs face amid the current outbreak,” said Neil Shen, Founding and Managing Partner of Sequoia Capital China, in an open letter published on January 27. “Founders should respond quickly and make necessary adjustments. The most important thing is managing to maintain cash flow during the period.”

Moves “Demo Day” online

Although strict travel restrictions have made it impossible for investors and startup founders to schedule face-to-face meetings, Sequoia Capital China has managed to give its portfolio companies access to fundraising by moving its “Demo Day” online for the first time. This event has been held regularly for several years to introduce some of the VC fund's early-stage investments to potential investors and in February nearly 30 startups pitched to more than 50 investors via its two three-hour online sessions.

“Our focus is discussing business strategies and work plans with founders and CEOs,” said Zhou Kui, a partner of Sequoia Capital China. 

For those Wuhan-based portfolio startups, the fund has customized a short-term support program, providing working-from-home and telemarketing training to around 100 businesses, as well as connecting banking institutions with startups that need loans. During one online session, Sequoia Capital China invited Xie Xin, Vice President of ByteDance, to share ideas on how to achieve collaboration and efficiency while employees were working from home.

The company has also come up with the idea of employee-sharing among its portfolio companies. This involves connecting employees of food and beverage chains that were temporarily shut down during the outbreak with local e-commerce companies seeing surges in demand. 

Focus on enterprise tech and healthcare

Founded in 2005 by Neil Shen, Sequoia Capital China had invested in more than 500 companies as of early 2019, including e-commerce giants Alibaba and JD.com, as well as the world's most valuable startup ByteDance. 

With more than RMB 100m under its belt, the firm still has strong faith in the startup scene in China and hasn’t slowed its VC activity amid the crisis. It believes Covid-19 will eventually end and all industries will exhibit stronger resilience thereafter. 

Only 153 VC/PE deals were reported in China in February, an 83.51% drop compared to a year earlier. During the same month, Sequoia Capital China alone invested in 25 businesses, nine of whom were its portfolio companies. 

Taking into account that Covid-19 would facilitate the transition from offline to online, the company has continued its preference for the enterprise tech sector. In addition to putting more money into existing investees, including health insurance tech company Nuanwa Technology and big data startup Sensors Data, it has added new members such as intelligent semiconductor manufacturing solution provider IKAS Industrial Automation and AI-enabled corporate services provider Recurrent.ai to the portfolio.

Sequoia China Capital is ramping up investment in the healthcare sector, too, following greater investor interest during the crisis. With nearly 100 medtech companies already in its portfolio, the VC firm has invested in a raft of new startups specialized in nucleic acid medicines, geriatric conditions and cardiovascular devices, including Hongene Biotech, SciNeuro Pharma and Insight Lifetech. 

Consumer services is another sector favored by the company. Although consumer spending has taken a huge hit during the outbreak, the company has noticed the surging demand for home delivery, new retail, grocery shopping and other family services. Its fresh investments in February thus include the Beijing-based startup Shuhai Supply Chain Solutions, which targets F&B businesses by providing them with a full range of services from logistics to financing.

In the eyes of Sequoia Capital China, the current crisis won’t last forever and opportunities will arise out of it. "Affected sectors are sure to recover gradually, while emerging ones will see rapid growth,” said Zhou.

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Edited by Matt Stanley

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