Venture Capital Firms Shedding University Investors

It never ceases to amaze me how the world turns. Here is one you probably never thought of.

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 $1.6 billion, also asked the university to sell its holdings in Sequioa's other funds.

Newspapers and other organizations have been suing publicly controlled 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 $182 billion into startups from 1998 through 2000. Much of that money was provided by universities, pension funds and other institutional investors.

With its move, Sequoia is ending a 22-year relationship with the University of California system, which had a $53.25 billion investment portfolio as of June 30. Just under $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 $110 million in Sequoia partnerships that generated a $508 million return, according to a sworn declaration by Treasurer David Russ.

Here is my suggestion. If your community is looking for a big institutional investor in local venture projects, you might want to give the University of California system a call because they just might be looking for another place to invest their money.

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