The Friday before last, we told you that longtime Sequoia partner Michael Goguen had been slapped with a stomach-turning complaint. At its crux, it accused him of breaching an agreement he’d made to pay $40 million to a woman he’d known for years. Apparently, after paying her $10 million, Goguen concluded that he was within his rights to stop writing her checks. The woman then hired a lawyer.
Whether the case ever goes to trial is now beside the point for Goguen, who has enjoyed a lucrative career as a venture capitalist and who, fairly or unfairly, will now be publicly associated with that complaint and the person who filed it, despite his strongly worded counter-complaint.
Fairly or unfairly, it also does real damage to Sequoia Capital.
Entrepreneurs aren’t the immediate issue. It would take a lot more than this bizarre situation for most founders to be deterred from accepting a check from Sequoia, whose imprimatur can make everything easier, from assembling a team, to attracting press, to, later, luring the right investment bankers.
That Goguen is no longer a partner of Sequoia certainly minimizes the damage. (A spokesman didn’t elaborate when explaining to us last week why Sequoia decided Goguen’s departure was the “appropriate course of action.” But we suspect his original deal with his accuser was made without the firm’s knowledge, which would be a major no-no. That kind of financial agreement would be material information to a partnership.)
A much bigger problem for Sequoia will be recruiting female investing partners.