A VC heavyweight just walked away from a $21m investment. Huh?

Sequoia Capital realized that it had 2 buzzy payments startups in its portfolio. Maybe there’s only room for 1.

March 10, 2020

Photo via Smith Collection/Gado/Getty Images

It seems like the kind of pickle that might only happen in Startupland.

One of the biggest names in venture capital pours $21m into a buzzy payments startup. Then it realizes 1 of the other major companies in its portfolio… is also a buzzy payments startup. Danger, Will Robinson!

What do you do? If you’re Sequoia Capital, you say: Finix, keep the (giant chunk of) change.

It’s a curious case of a confounding conflict of interest…

… and TechCrunch got the scoop. A brief recap:

  • Finix, a payments-infrastructure company, raised $35m in a Series B round this winter. Sequoia Capital led the way with $21m.
  • On Monday, Finix said Sequoia informed them of a “conflict of interest” because of Sequoia’s investment in Stripe, a competing payments startup.
  • Sequoia’s solution: It told Finix to keep the $21m. Finix flipped it into $10m in new investment money, and added Penny Pritzker, a former US Secretary of Commerce and Inspired Capital partner, to its board.

TechCrunch said Sequoia had never backed out of an announced deal in its nearly 5-decade history.

Soooo… Why the heck did this deal fall apart?

It’s hard to know for sure, but people have theories. Business Insider said the competition between Stripe and Finix was heating up. VC Starter Kit laid out a few possibilities:

  • Maybe Sequoia didn’t want to inflame that competition — or get a rep for double-dealing.
  • Maybe Stripe’s deal with Sequoia had a “no competing investments” clause.

Also: How much does $21m even matter? The windfall was a big deal to Finix, obviously, but to major investors, does it just feel like a Venmo payment?

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