House committee investigates Sequoia Capital's Chinese AI, chip investments
A congressional committee is seeking information from the venture capital firm Sequoia Capital on its investments in Chinese artificial intelligence, semiconductor and quantum computing companies as well as its announced stand-alone China unit launching next year.
"For more than a decade, Sequoia Capital China's significant U.S. dollar investments in PRC [People's Republic of China] entities have included certain investments that contributed to the CCP's [Chinese Communist Party's] human rights abuses, the PRC's military modernization,and its overall efforts to undermine U.S. technological leadership," leaders of the House Select Committee on the Chinese Communist Party said in an Oct. 17 letter sent to Sequoia.
Committee Chairman Mike Gallagher (R-Wis.) and ranking member Raja Krishnamoorthi (D-Ill.) raised concerns over several Sequoia investments in Chinese companies, including drone makers, AI developers and facial-recognition technology creators.
In June, Sequoia announced that it would split its investment business and move to "completely independent partnerships" in China, India and the U.S. and Europe by March 31, 2024. The Sequoia China business will retain its Chinese name and will become HongShan in English.
The move came shortly before President Joe Biden in August signed an executive order prohibiting new private equity, venture capital and joint venture investments in Chinese companies focused on semiconductors and microelectronics, quantum information technologies and AI. The order also requires Americans to notify the Treasury Department of direct investments in those sectors.
Sequoia's business split allays some of the lawmakers' concerns "by curtailing the flow in some cases of U.S. managerial and technological expertise to problematic PRC companies," but questions remain.
The lawmakers asked for a host of information and gave Sequoia until Nov. 1 to respond.
Their inquiries include asking for information on each company that is researching or developing products or services related to AI or machine learning, semiconductors, or quantum computing or quantum information systems that Sequoia Capital or Sequoia Capital China has invested in since 2010 that is either based in or has significant operations in China. Also, the lawmakers asked how investment decision-making for transactions in China and risk assessment around national security or human rights concerns are communicated with limited partners of Sequoia Capital or Sequoia Capital China.
When asked for comment, a Sequoia spokesperson wrote in an email, "We've received the letter, are reviewing it and will respond."
Sequoia China, which manages about $56 billion, has invested in about 1,200 portfolio companies in the country and has more than 300 staff in the country. The fund raised about $9 billion for investments in 2022 from pensions, endowment funds and family offices from the U.S., Europe, the Middle East and Southeast Asia.
The committee's Sequoia inquiry expands its investigation into venture capital firms' Chinese investments. In July, the committee sent similar inquiries to GGV Capital, GSR Ventures, Qualcomm Ventures and Walden International.