Sequoia gives away $21M investment in Finix as it walks away from deal

&quot;it’s hard to understand why it felt compelled to give away $21 million — money that institutions like Stanford and hospitals give to Sequoia to invest on their behalf.&quot;<p>Does not seem that hard to understand to me. They led the round, that means other investors are in on the deal as a result of Sequoia. If they had taken the money back, they would have lost the trust of other investors in future fundraising rounds that they lead and left the other investors in Finix in a bad spot with a lot of capital in a company that is now, presumably, $21m short of their needs.<p>$21m is nothing compared to the loss of trust in Sequoia that pulling the funding would have caused.

The framing is weird here.<p>It makes it sound like the deal fell through but Sequoia still gave them $21M to be nice.<p>In reality, they had already given them the money in exchange for a board seat&#x2F;equity&#x2F;etc. When they realized they couldn&#x27;t continue this relationship, the only option was to relinquish the half of the deal they could control. They probably couldn&#x27;t get the money back even if they wanted to, and there&#x27;s no way they&#x27;d attempt to and risk their reputation.<p>It makes sense for Sequoia and their LPs (Stanford, etc). They put $18 million into Stripe at a $100 million valuation, and Stripe is now worth $35Bn and growing. Sacrificing $21M to not hurt a relationship with Stripe is a rounding error for them.

Unbelievable. <i>Due diligence</i> for Series A rounds is pretty comprehensive. How in the world this process, especially in such a solid VC firm as Sequoia, could miss a potential significant conflict of interests is beyond my understanding.

Maybe they are trying to avoid a conflict of interest in preparation of Stripes IPO? Giving up 21 million might be better than losing the chance to participate in a large IPO if you’re kicked out due to violating a non-compete. I am no expert in VC, maybe someone with more experience can chime in?

I would wager that this is because Stripe openly complained with them and demanded a public dissociation if Sequoia wanted to be eligible to invest in future rounds of Stripe.<p>They try to spin this like it&#x27;s a good thing for Finix, but the reality is that every other VC in the world will now wonder what dead bodies are hiding in the closet there.<p>If I would be Finix I would heavily focus on profitability and taming whatever demons you have inside the company to avoid going to capital markets for a very long time.

VC&#x27;s &quot;skin in the game&quot; is interesting.<p>EG the $21,000,000 they just &quot;gave away&quot; will need to be paid back to investors before Sequoia partners see any of their carry &#x2F; performance fee.<p>On a $100,000,000 fund the VCs have a performance fee of something like 20% of the profits on every $1.00 over $100,000,000 they send back to investors.<p>Yes this is house money, but it&#x27;s still real skin in the game for the partners who just evaporated at least $4 - 5m in potential fees on other investments to maintain the integrity of their brand.

&gt; Finix has told TechCrunch before that, unlike Stripe, it doesn’t think of itself as a payments company but rather a payment infrastructure company. Most notably, it likes to note that it doesn’t take a percentage of transaction fees but instead charges customers a monthly software fee, along with a sliding fee associated with the number of payments they process. Yet Stripe has a product, Stripe Connect, that operates much the same way and has since its debut in 2013.<p>Ehhh... sounds (and looks) very much like a clone of Stripe to me. And saying, &quot;we&#x27;re different because we are infrastructure&quot;, is just icing on the dishonesty cake. Not sure why Sequoia would ever have invested in a copycat to Stripe in first place.

So absurd, Finix&#x27;s site even mimics Stripe&#x27;s.

...and I wait, and wait for Stripe &quot;clone&quot; for adult industries that is more user-friendly than competitors in this field. Yes, I know that everyone is afraid sex, and VCs are terrified of legal struggles. But there&#x27;s such a huge niche to fill in for some bright and brave minds. :)

Abandoning equity is relatively common, but not like this. Usually its because a VC cannot realize a capital loss until it abandons (or sells) the equity of a worthless company. Finix raised $35m about a month ago. There&#x27;s no way Sequoia thinks they&#x27;re worthless already.

The design, look and feel looks like a copy of stripe&#x27;s website.

Imagine if they instead invested $100K in 210 startups that have been working their ass off :)<p>I realize, of course, that they couldn’t do that in this case. But anyone who says governments have waste versus the private market never considered the sheer amount of waste in large corporations :)<p><a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=19921386&amp;p=2" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=19921386&amp;p=2</a>

That&#x27;s a sure way to scream &quot;ulterior motive&quot; at the top of your lungs. I doubt anyone is buying the PR as written.

I am surprised to see this could really happen - Wondering what would happen to the partners and associated led this transaction. Did anyone find out something about this? I couldn&#x27;t at least through the article.

There&#x27;s something more going on here I think.

I don&#x27;t understand why they couldn&#x27;t have just held onto the shares and given up the board seat &#x2F; preferred rights.

I thought their whole pitch was to be an “anti-Stripe” that lets you own your own payments platform

I mean, considering Sequoia&#x27;s net worth, $21M is tip money for them.

I wonder if Finix should have raised the issue? Article oddly remiss.

I have a theory that this is just the scape goat for what is really a desire to decrease funding during the corona virus panic. Not that being over leveraged in payments companies is a good thing but it might not be the primary motivator here.

Kind of crazy they couldn&#x27;t find somebody to swap with

Props to the Sequoia partner who led PR for this.

Change the title to Finix please.<p>Sequoia is giving away $21M to Finix as it walks away from deal

God I hate clickbait.