Making the Rounds: What investors need to know about the different stages of startup funding

Facebook’s $19 billion acquisition of WhatsApp last month marked the largest recorded deal for a venture-capital-backed company in history. While the unprecedented price tag of the purchase was certainly a story in and of itself, what really garnered attention among venture capitalists was that Sequoia Capital was WhatsApp’s lone VC investor.  Although sources differ on the exact stage at which Sequoia first invested in WhatsApp, as well as the exact amount of the initial investment, the general consensus is that the company will reap a return of approximately 50x on an investment made as early as a Series A round of funding. How is it that Sequoia managed to emerge from this deal with profits estimated to be in excess of $3 billion? The answer, though undoubtedly a combination of a variety of factors, is largely based on timing. Jumping back almost three years to April 2011, when WhatsApp had just secured an $8 million investment from Sequoia, the newly-founded messaging service had all of 4,050 reviews for its Blackberry app. To put that into perspective, the Blackberry app now...

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