Sequoia Capital cuts again fund for crypto investments

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Sequoia Capital has slashed the scale of two of its funds, together with a cryptocurrency automobile raised final yr, because the Silicon Valley-based enterprise capital agency retrenches in response to a pointy reversal in personal markets.

The agency reduce the scale of its crypto fund from $585mn to $200mn and halved its ecosystem fund — which backs smaller enterprise funds or solo traders — from $900mn to $450mn.

The discount within the measurement of the funds, which was communicated to the agency’s restricted companions in March this yr, comes amid a broad downturn for personal expertise firms and a liquidity crunch for some restricted companions — the traders who present capital to enterprise capitalists to take a position on their behalf.

“We made these adjustments to sharpen our give attention to seed-stage alternatives and to offer liquidity to our restricted companions,” Sequoia mentioned, including that the agency has returned greater than $15bn to its traders over the previous three years.

The discount of the fund sizes was first reported by the Wall Road Journal.

Sequoia has undergone a succession of main adjustments this yr. In June, it introduced it might break up off its extremely profitable Chinese language entity amid rising tensions between the US and China, and earlier this month it introduced associate Michael Moritz would step down after 38 years at Sequoia.

Moritz “helped set up Sequoia as one of many main expertise funding teams on this planet”, Roelof Botha, Sequoia’s managing associate, mentioned on the time.

The agency is repositioning itself at a precarious second for enterprise capitalists, as personal markets reset after greater than a decade of development throughout which funds ballooned in scope and scale.

Sequoia’s ecosystem and crypto funding funds have been introduced in early 2022, when the enterprise market was driving excessive. Since then, rising rates of interest and falling financial confidence have hammered start-up valuations, diminished public listings to a trickle and stalled enterprise funding.

“Enterprise traders are just a bit extra cautious generally,” mentioned Conor Moore, a associate in KPMG’s enterprise capital apply. “There’s nonetheless cash there to be invested however the tempo has slowed down as a result of exits have all however stopped.”

Cryptocurrency funding has been notably laborious hit, with various the sector’s most outstanding firms embroiled in regulatory or authorized disputes. Funding into cryptocurrencies and initiatives fell 80 per cent between the primary quarter of 2022 and the primary quarter of 2023, based on PitchBook.

Sequoia’s most high-profile guess within the sector was FTX, Sam Bankman-Fried’s cryptocurrency change, in July 2021. The corporate collapsed final yr, and Bankman-Fried has been charged with a number of counts of fraud. Sequoia has written down its $214mn funding within the firm to zero.

The collapse of FTX has forged a pall over the sector, and Sequoia will now deploy its downsized fund into early-stage firms. The corporate mentioned it’d nonetheless make investments into crypto through its different funds.