Venture Firms Bask in a Surge of Blockbuster Profits

Sutter Hill’s Snowflake bet eclipses some of the biggest returns in U.S. startup history

Nearly a decade ago, venture-capital firm Sutter Hill Ventures made a small wager on an idea for a cloud computing services company, helping found and fund Snowflake Inc. SNOW +1.77%

The bet paid off: Last month, Sutter Hill distributed a profit of nearly $12 billion on the less than $190 million it ultimately invested, as it transferred its shares in the company to its investors and partners, marking one of the most profitable investments ever in venture capital.

The venture sector has long been defined by big wins on disruptive tech companies, balanced by far more numerous losing bets. But in recent months, an unusually large number of venture investments have logged multibillion-dollar profits, setting many firms up for their greatest returns since the dot-com boom of the late 1990s.

Today, Sequoia Capital, an early backer of giants including Apple Inc. and Alphabet Inc.’s GOOG -0.68% Google, holds more than $14 billion of stock in Airbnb Inc. ABNB -1.34% that it got by investing about $235 million, as well as $8.4 billion in stock in DoorDash Inc. that came from investing more than $240 million, securities filings show.

Accel holds more than $7.5 billion of stock in recently listed software company UiPath Inc., a huge profit on the $172 million it invested. Altos Ventures put nearly $400 million into gaming platform Roblox Corp. , according to a person familiar with the matter, for a stake now worth $8.5 billion. Andreessen Horowitz, an early backer of Coinbase Global Inc., holds over $6 billion of stock in the company and recently sold or transferred to its investors another $3.2 billion.

Venture firms generally hold most of their investment in a company until it goes public. Depending on the firm, some sell or transfer shares in a company to the firm’s investors once a lockup period expires post-listing—as Sutter Hill did with Snowflake—while others hold longer, hoping the stock goes up more.

Aside from Sutter Hill, these funds have yet to sell or transfer most of the stock to their investors. If they did so today, the gains would eclipse several of the best-ever venture investments in U.S. companies in overall dollars, including Accel’s more than $5 billion profit on a $15 million early investment in Facebook Inc. and Kleiner Perkins’ $7 billion profit on a $3 million investment in Juniper Networks Inc. in the dot-com boom. Both those investments were far more lucrative on a percentage basis than the recent crop of winners.

Interest in stocks of fast-expanding companies, particularly newly listed tech companies, is fueling the burst of big profits now. With low interest rates, a host of stimulus actions by the federal government and a flood of amateur investors getting into stock trading, demand for those shares has surged.