Neil Shen’s bold move! Goes solo to China as legendary company Sequoia disbands!

As Beijing was squashing its tech industry, banning lucrative business models and freezing new foreign listings, Neil Shen took to the podium in the Chinese capital with a message to fellow entrepreneurs: Align your companies with the country’s leadership.

Redwood ChinaThe billionaire founder of insinuated that his venture capital group was already in tune: 80% of the companies he recently invested in were in “artificial intelligence, advanced manufacturing and other fields of advanced technology,” he told the conference.

Two years after Shen’s speech, the breakup of one of the world’s most successful investment empires had become inevitable. The Silicon Valley-based group this week said yes by severing his Chinese arm in an independent institution.

Shen’s partnership with Sequoia is rooted in a simple idea: marrying American money to Chinese entrepreneurs.

It made both sides incredibly rich but growing tensions between the two powers they gradually changed the way this match was viewed in both Washington and Beijing.

Chinese leaders are less eager to see American investors reap the benefits of their fledgling companies. They want startups to prioritize building the country’s technology base. Meanwhile, the prospect of China catching up is shaking politicians in Washington.

“The degree of paranoia in Washington about Chinese technology is extraordinary,” said a US-based investor briefed on the details of the Sequoia split.

Shen has been instrumental in Sequoia’s success in China since he helped lead the Silicon Valley group in the country in 2005. Other US managers have also tried, but with far from similar results.

A natural mathematical genius, Shen graduated from a top university in Shanghai before continuing on to Yale for a master’s degree. He started his career on Wall Street and returned home as the Chinese economy was starting to grow. He was soon at Deutsche Bank, helping companies raise funds in Hong Kong.

At the turn of the millennium, Shen and a childhood friend created Ctrip, one of the first travel booking sites in China and now worth $24 billion. Shen left executive positions at the company in 2005, around the time Sequoia tapped him and partner Zhang Fan to lead the US group’s plunge into China.

A handful of years later, Zhang walked out, leaving Shen in charge of Sequoia’s operations in China. With the Sequoia brand and backing, it raised the most money, mainly from US institutional investors, and built an incomparable record: from Alibaba to e-commerce groups JD.com and Pinduoduo, delivery group Meituan and parent TikTok Byte Dance.

Now 55, Shen is on his own. Its 300-strong Chinese team will adopt its Chinese name, HongShan, and continue to funnel dollars raised from around the world into the country’s most promising startups. Historically more than 90% of their returns came from the consumer, consumer technology and healthcare sectors, but they have invested more widely in recent years, according to a person familiar with the matter.

Chinese business owners say the loss of the Sequoia brand will have little impact nationwide. “Most mainland Chinese entrepreneurs don’t speak English at all,” stressed the founder of a major technology company. “So they will still know HongShan as HongShan: just the two Chinese characters.”

The founder said, “The magical part about Neil Shen is that he is very good at multitasking, so he has many wallets and [it] I’m amazed that he can take care of each of them.”

Even with $56 billion under management and more than 1,000 portfolio companies, several founders said Shen remained deeply involved. “Every time he comes to Shanghai he has many meetings with CEOs,” said Michael Yu, founder of Innovent Biologics, a $7 billion biotechnology company listed in Hong Kong.

“I’ll update him on what’s going on. And at the same time he shares with me what he has seen over the past two or three months. He probably spends 16 to 18 hours a day on work.”

Despite his rhetoric at that sensitive time in Beijing, people close to Shen say he’s more of a bridge-builder to the outside world than almost anyone else in Chinese tech. He’s “curious about the world as a whole: interested in technology, culture, politics,” said a former colleague, and is “incredibly well-connected in major capitals.”

Shen has launched another venture in recent months, introducing American corporate giants like former Starbucks leader Howard Shultz and hedge fund manager Ray Dalio to Chinese audiences in lengthy, in-depth interviews broadcast on ByteDance-owned Douyin.

Shen’s global reach and record have made him one of the few China-focused managers still able to land billion-dollar funds as increasingly thorny geopolitics keep most Western investors away. According to research provider Preqin, total funding for venture capital and private equity in China plummeted by 80% last year. But Sequoia China raised nearly $9 billion, the largest fundraiser in its team’s history, raising a third of total funding for China.

However, Fraser Howie, an independent expert on Chinese finance, estimates that the economic liberalization and foreign money boom in China since Shen established Sequoia’s China arm has essentially reversed.

“Will court capital as a Chinese VC firm, using a pinin name as opposed to a US brand,” Howie said. “Its reputation speaks for itself, but it’s only going to get harder and harder.”

Shen, however, retains the loyalty of legions of Chinese founders. Zhang Lei, founder of clean energy group Envision, said Shen’s star power far surpassed that of Sequoia in China.

“Capital is a commodity,” Zhang said, noting that Shen’s biggest contribution came from the insights, network, and entrepreneurial drive he added to new ventures.

“The money supply is everywhere from the Middle East, Asia, Europe, the United States,” added Zhang. “So as long as Neil is there and is committed to managing this fund. . . this is what matters most to him.

Nian Liu contributed reporting from Beijing