Sequoia Capital

In 2025, Sequoia Capital managed approximately $56 billion in assets and announced two new funds totaling $950 million: a $750 million early-stage fund targeting Series A startups and a $200 million seed fund. The firm made 119 investments through December 2025, maintaining its decade-long average of 80 annual deals. These numbers mask the mechanism generating outsized returns: preferential attachment, where early advantages compound exponentially rather than linearly.

Preferential attachment operates through reputation cascades. When Sequoia backs a Series A startup, that company doesn't just receive capital—it receives hiring advantages (top engineers preferentially interview with Sequoia companies), customer acquisition benefits (enterprise buyers perceive lower procurement risk), and follow-on funding certainty (Series B investors assume Sequoia performed rigorous diligence). Each advantage compounds: better engineers build better products, attracting better customers, generating better metrics, securing better Series B terms. By Series C, Sequoia-backed companies trade at 15-25% higher valuations than comparable non-Sequoia companies with identical metrics.

The portfolio composition reveals power law returns in action. Of 1,644 companies backed since 1978, Sequoia generated 129 unicorns (7.8% hit rate), 119 IPOs (7.2%), and 412 acquisitions (25%). But returns concentrate ruthlessly: the top 10 investments (0.6% of portfolio) generated 60% of realized gains. This matches biological network growth patterns precisely—when nodes accumulate connections based on existing connections (the rich get richer), degree distribution follows a power law rather than normal distribution.

The November 2025 leadership transition illustrates how preferential attachment creates institutional path dependence. When Roelof Botha stepped aside for Alfred Lin and Pat Grady as joint managing partners, the firm maintained its "stewardship model" created by founder Don Valentine. The terminology matters: stewards inherit reputation rather than build it fresh. New partners at Sequoia can deploy capital knowing entrepreneurs preferentially accept their term sheets—the opposite dynamic from new fund managers who must prove themselves before accessing premium deal flow.

Sequoia's 2024-2025 focus on AI (Fireworks AI became a unicorn one year after investment), security (Xbow), and AI infrastructure (Reflection AI, OpenEvidence) demonstrates how preferential attachment accelerates during technology transitions. When new categories emerge, entrepreneurs face maximum uncertainty about which investors provide most value beyond capital. Established reputation breaks ties: Sequoia's portfolio includes NVIDIA, OpenAI, and the infrastructure layer enabling AI deployment, creating knowledge networks that new AI founders cannot access elsewhere.