Sequoia Hits Again: YouTube Sells for $1.65B

If you somehow haven’t heard, Google today announced that it will acquire YouTube in a stock transaction worth $1.65B. The official press release is here.

The New York Times has an excellent article on the transaction. I’ve pulled a few excerpts related to YouTube (and Mark Logic) investor Sequoia Capital below.

Still in their 20’s and working from a garage, the two [YouTube founders] secured $3.5 million in capital from Sequoia Capital, the same firm that helped finance Google when it was still a fledgling company, as well as other Silicon Valley stars like Apple, Cisco, Oracle and Yahoo …

Sequoia’s stake in YouTube has been estimated at approximately 30 percent, which means it would be worth about $495 million based on the acquisition price …

Experts say Sequoia’s go-it-alone investment in YouTube represents the kind of aggressive move for which Sequoia is known. A more typical, and safer, approach would have been to bring in other investors, …

Per their corporate boilerplate, YouTube was founded in February 2005, making the company 18 months old. This means that YouTube has created slightly less than $100M per month in value for its owners during its brief existence. I’m not positive, but I’d have to bet that this is a record rate of equity value creation.

I must say that I’m pleased to have Sequoia as the lead investor in Mark Logic and that they continue to impress me not only with their day-to-day support of our company (e.g., introductions, advice, board participation) but also with their vision (e.g., brainstorming, thought leadership) and also their execution. On execution, three miracle transactions come to mind:

  • A tremendously successful IPO with Google in the middle an IPO drought (2004)
  • A $1.65B exit with YouTube in the middle of a general exit drought (sauf software connsolidation which is mostly a big-eat-big phenomenon today)
  • Doing the same thing with PayPal for ~$1.5B in the bleakest part of the Internet bust (2002)

Visit Sequoia here to learn more. I particularly like the left column of this page, where they explain what they think makes for sustainable companies.

Update (10/12/06): Here’s a link to a Mercury News article that profiles other major Sequoia success stories.

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