Venture Capital Fund Strikes it Rich with YouTube

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Sequoia Capital made a large, early bet on the video-sharing Web site YouTube. The Silicon Valley venture capital company has won big in the past with early stakes in Apple, Electronic Arts and Google. This time around, its return on investment is astronomical.

STEVE INSKEEP, host:

There are many winners from this week's sale of YouTube to Google for more than $1.5 billion in stock. Among them are YouTube's founders and investors in a Silicon Valley venture capital fund.

NPR's Wendy Kaufman reports.

WENDY KAUFMAN: Beginning in November of last year, Sequoia Capital invested a total of $11.5 million in YouTube. Though the firm isn't saying, their estimated take from the sale is thought to be about $495 million in stock. That's 43 times their investment.

Mr. JERRY ENGLE (Haas School of Business, University of California, Berkeley): That's the extraordinary return. Just extraordinary.

KAUFMAN: Jerry Engle is a venture capital expert at the Haas School of Business at the University of California, Berkeley.

Mr. ENGLE: A venture capitalist would consider a homerun, ten times their return. A very good return would be five times their return in five years.

KAUFMAN: Sequoia, which has been around since 1972, is considered one of the nation's most successful VC firms. It has put money into Apple Computers, Cisco Systems, Yahoo, Google, and of course, YouTube. Not surprisingly, there have also been some high-profile investment flops, including E-Toys, and the online grocer, Webvan.

Now, just in case you're thinking you might want to invest in Sequoia...

Mr. JOE BARTLETT (Founder of VC Experts): Not a chance! Forget about trying to get in there.

KAUFMAN: And, says Joe Bartlett, founder of VC Experts, a Venture Capital Web site.

Mr. BARTLETT: I can find you plenty of places that'll take your money in a heartbeat. But Sequoia will not be one of them.

KAUFMAN: The best VC funds, he says, are over-subscribed.

Wendy Kaufman, NPR News.

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