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July 23, 2017

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WhatsApp gets payback for venture capital star Sequoia

SAN FRANCISCO--Grandfather of Silicon Valley investment Donald Valentine rang up a major payday while evening the score a bit with relative new kid on the block Mark Zuckerberg.

Valentine's Sequoia Capital is in line for a dizzying return from the purchase of startup WhatsApp by Facebook, whose famous founder snubbed his venture firm a decade ago.

Sequoia's unprecedented string of moneymaking moves includes being an early backer of Apple, Google, Yahoo, YouTube, Oracle, PayPal, Electronic Arts, Zappos and Cisco Systems.

Facebook was the one that got away.

That was, until this week when the social network founder who once made sport of Sequoia with a prank that became the stuff of Internet industry legend inked a deal valued at up to US$19 billion to buy Sequoia-backed WhatsApp.

Sequoia's return on its roughly US$60 million investment in WhatsApp has been estimated to be anywhere from US$3 billion to nearly US$7 billion depending on how big a piece of the startup it owns.

The windfall also made an idol of Sequoia partner Jim Goetz, who orchestrated the bet on the startup out to supplant traditional smartphone text messages with a virtually free Internet-based alternative.

The investment firm, based not far from Facebook's headquarters in the California city of Menlo Park, was also a backer of smartphone photo sharing service Instagram.

Facebook founder Mark Zuckerberg snapped up Instagram in 2012 for a billion dollars.

The WhatsApp deal was seen by some as payback for a trick Zuckerberg played on Sequoia shortly after coming to California in 2004 to infuse his Facebook vision with Silicon Valley energy.

In a stunt made famous in a book and a film spun from the social network's creation story, Zuckerberg showed up late in his pajamas to an appointment at Sequoia and made a pitch that was more taunting than tempting.

Zuckerberg had become an ally of Napster co-founder Sean Parker, who had a grudge against Sequoia and was out for a bit of vengeance.

Older, wiser and now the boss of publicly traded Facebook, Zuckerberg has gone on record saying he feels "really bad" about being rude to Sequoia.

Kicking a few billion dollars to Sequoia and bolstering its reputation as a powerhouse Silicon Valley investment firm provides ample balm for soothing hurt feelings.

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