Sequoia is giving away $21 million to a payments startup it recently funded as it walks away from deal – TechCrunch

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Still, in a case that takes this understanding to a brow-raising extreme, Sequoia Capital has, for the first time in its history, parted ways with a newly funded company over a purported conflict of interest and, almost more shockingly, handed back its board seat, its information rights, its shares and its full investment.
Candidly, we’re still trying to piece together what we might be missing, but what we know so far: This morning, Finix, a payments infrastructure company that was founded four years ago in San Francisco, told its roughly 70 employees that Sequoia — which led the company’s $35 million Series B round in early winter — is separating itself from the startup.
The reason, Finix told employees: Sequoia concluded soon after issuing its check that Finix competes too directly with Stripe, the payments company that represents one of Sequoia’s biggest private holdings currently and that in turn counts Sequoia as its one of its biggest outside investors.
As a result of Sequoia allowing Finix to keep its capital (thus materially strengthening Finix’s balance sheet), earlier backers in Finix — led by Inspired Capital of New York and including PSP Growth and others — have invested an additional $10 million in the company, which has now raised $65 million in capital altogether.
For starters, it’s difficult to understand how Sequoia could have only realized after making the investment that Finix and Stripe compete on some level — and might do so increasingly over time.
The firm instead sent us a statement by Pat Grady, the Sequoia partner behind the deal, that reads: “While we’d previously concluded that Finix was not a direct competitor to any existing portfolio companies, after making the investment we came across a variety of small data points that collectively painted a different picture of the market.
A spokesperson for Stripe who was asked whether Stripe and Sequoia discussed its investment in Finix at any point, also declined to comment.

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