Sequoia Capital Had Cut Investments For 2 New Funds In The Crisis

Key Points:

• Sequoia Capital had cut investments for two new funds worth $950 million and $600 million amid a decline in VCs.
• So far, 10% of crypto funds have been deployed.
• The company is committed to still investing in cryptocurrencies.

Partner Alfred Lin said on Thursday that Sequoia Capital had cut management fees in two of its new venture funds as it prepares for a slower investment environment, according to Reuters.

Limited partners (LPs), who contributed money to Sequoia Capital’s crypto and ecosystem funds, which were launched early last year, are now able to pay management fees based on capital deployed rather than the standard model of capital under management that is used for other Sequoia funds. The changes in fee structure were announced to investors in December.

In addition to a $600 million crypto fund to invest in cryptocurrency businesses and tokens, Sequoia unveiled a $950 million ecosystem fund to support scouts and funds established by Sequoia alumni. According to Lin, 10% of the cryptocurrency fund has already been used.

The world’s largest venture investor made an uncommon concession with this decision after U.S. venture capital agreements decreased by 31% from their peak in 2021. The sharp decline in Internet company valuations and the consequences for Sequoia Capital’s portfolio business FTX have put the firm’s long-standing relationships with LPs to the test.

Speaking on behalf of the company at the StrictlyVC event on Thursday, Lin said that thorough investigation and due diligence had been done on FTX through internal processes that had been started.

“We were misled for a variety of situations,”

Lin said.

According to Reuters, the U.S. Securities and Exchange Commission (SEC) has inquired about several investors in FTX’s due diligence procedures.

Sequoia reduced its investment in FTX by $150 million from its third Global Growth Fund and by $63.5 million from its crossover fund, bringing the total amount invested in FTX and FTX US to zero. According to Lin, the company is still committed to cryptocurrency investment.

“We will invest through a slower time but we will also continue to advance. We are a long-term optimist in crypto and in variety of other sectors,”

Lin said.

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