[dcolkitt]

When Sequoia expands their AUM they make more money because they have more assets to collect fees on. This mechanism expands their AUM every time they tender shares.

Sure common stock has a discount to preferred stock, but it's not an infinite discount, and it's mostly applicable in the pessimistic scenario. If employees are exercising their options, it's usually because the portfolio company in question has performed well.

Sequoia would most likely be happy to acquire shares in those companies at reasonable discounts to preferred, which would make both parties happy. With a permanent capital structure, the most logical thing to do is for them to keep levering up positions in their winning positions.

[someguydave]

Plus, if those employees get Fund shares and sell them back to Sequoia for cash, that opens up room for more investors to enter the Fund without any dilution. I can imagine some closed growth funds might have a hard time finding sellers.