>“There is so much money now (in the tech sector). You need to have a bigger war chest,” said a Hong Kong-based investment banker familiar with Sequoia’s strategy.
But what if it’s a bubble?
But what if it’s a bubble?
In part this is allowed by the fact that most LPs diversify their funds, so they're not completely vulnerable to problems in a single sector. It's also because funds are rarely judged against absolute return; they're judged against benchmarks. If the entire market falls by 10%, and a fund only falls by 8%, then they're still doing well relative to their benchmarks.
But what's more important to Sequoia is not missing out on returns. LPs aren't investing so that Sequoia will keep them from losing money. If that were their primary goal they would just invest in CDs or government bonds. They're investing with Sequoia so they don't miss out on the upside. And if that's the priority, and Sequoia's competitors have far more money to allocate (see SoftBank with their $100 billion fund), then Sequoia also needs more money to allocate to stay competitive.
Bubble versus Not Bubble is a measure on expected returns. Past performance does not guarantee future results. Projecting a half-decade sample of opinions across infinity is absurd.