Sequoia raises $861 late-stage fund; shrugs off legacy of Webvan et al.

Sequoia Capital, enjoying the buzz from being one of the most successful venture capital firms, is trying its hand at investing in later-stage companies, something it failed miserably at during the Bubble.

It has raised a total of $861 million for its so-called Sequoia Capital Growth Fund III, according to VentureWire today (sub required). That’s more than the original of $520 million we reported about this fund back in September, and shows that Sequoia continued raising money after closing on the first amount and filing original documents with the Securities & Exchange Commission.

We mentioned earlier the fate of Sequoia’ first late-stage fund, raised during the Bubble years despite warnings of its elder partner, Don Valentine. Called the Sequoia Franchise Fund, it invested in once-promising companies like WebVan, Scient, eToys, only to see them flameout spectacularly (see our original story). Sequoia is still losing money on that fund, which shows a -17 percent return, according to Univ. of California documents as of Sept. 05.

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But the firm’s new, yonger leader, Michael Moritz, who gained esteem after investing in Google and Yahoo, is trying the bold move yet again (it was Moritz who pushed or the Bubble-era fund). And this time, it is apparently the largest fund ever raised by Sequoia. No partners have been added to oversee the fund, another sign of chutzpah because it means Sequoia thinks it can do the extra work with the same number of partners. Sequoia may be betting its reputation is strong enough that the most promising companies will approach it for investments, so that Sequoia can invest with relatively little risk — even though its partners aren’t supposed to be late-stage experts.