Facebook today announced its huge, $19 billion acquisition of WhatsApp. Obviously the company has a lot to cheer about, having grown to 450 million active users over the course of the last five years. But from a pure venture perspective, the purchase represents another huge win for Sequoia Capital and partner Jim Goetz.
You can’t really blame other investors for not getting in on WhatsApp earlier, since it really only did one public round of funding. With the number of users that the company has and the purchase price it went for, it’s hard to believe WhatsApp had raised just $8 million over the course of its lifetime.
The point is that Sequoia’s investment in WhatsApp looks pretty damn smart right now. As the largest acquisition of a venture-backed company in history, that clearly puts it in the early lead for biggest single return this year.
“For the past three years, it’s been our privilege to work shoulder-to-shoulder with Jan and Brian as their close business partner and investor,” Goetz said in his post on the topic. “It’s been a remarkable journey, and we could not be happier for these talented underdogs whose unshakeable beliefs and maverick natures epitomize the spirit of Silicon Valley.”
Of course, WhatsApp isn’t the first company Sequoia had invested in before being acquired by Facebook. It led a $50 million round of financing in Instagram just days before the photo-sharing app was acquired. But it’s by far the biggest.
Assuming Sequoia held about a 10 percent stake in WhatsApp, its take is a solid $1.6 billion — or a 200x return on that initial investment. The deal by itself could provide a return on the $1.3 billion fund the WhatsApp investment came from.
This WhatsApp deal might even be considered Sequoia’s revenge, after passing on Facebook because once upon a time Mark Zuckerberg showed up to a pitch meeting in his pajamas.