- Sequoia Capital scales down cryptocurrency fund from $585 million to $200 million amid market challenges, reported WSJ.
- Focus shift to early-stage startups, and lower capital threshold to attract investors.
- Sequoia Capital returned $15 billion to investors; venture capital investments were down 29.7% in June.
Sequoia Capital, a prominent venture capital firm, has decided to scale down its cryptocurrency fund significantly. The fund’s initial size was an impressive $585 million, but it has now been reduced to $200 million. The move comes as a response to challenges in liquidity and a strategic shift towards supporting smaller players in the cryptocurrency space. According to a report in the Wall Street Journal on July 27, the technology-focused VC company informed its investors about this decision back in March, aiming to align with the evolving market conditions.
In light of the recent turmoil in the cryptocurrency industry, the cryptocurrency fund is shifting its focus toward supporting early-stage startups. This decision was made due to the reduced availability of opportunities to invest in larger companies within the crypto space. Moreover, the downsizing also serves the purpose of lowering the capital threshold, making it easier for investors to participate in Sequoia’s fund offerings. By doing so, the venture capital giant aims to attract a broader range of investors and adapt to the changing market dynamics in the crypto sector.
According to reports in the Financial Times, Sequoia Capital stated that it has returned over $15 billion to its investors in the last three years. This significant return highlights the firm’s successful track record and underscores its ability to generate substantial profits for its investors during that period.
We made these changes to sharpen our focus on seed-stage opportunities and to provide liquidity to our limited partners.
Financial Times
Sequoia Capital’s cryptocurrency fund was launched in February 2022, amid a 39.1% market cap decline from the all-time high of $3 trillion in November 2021.
Unfortunately, the fund faced tough times, most notably due to its $214 million investment in FTX, which eventually went bankrupt. Consequently, Sequoia Capital had to mark down the value of its FTX investment to zero, adversely affecting the fund’s overall performance and returns.
Sequoia’s decision to downsize its cryptocurrency investments is part of a larger trend observed among various venture capital firms.
In June, the overall venture capital investments in the cryptocurrency sector experienced a significant drop of 29.7%. During that month, a total of $779.32 million was raised through 62 separate deals, as per data.
Comparing June 2023 to the same month in the previous year, venture capital inflows have witnessed a substantial decline of 77.7%. This decline highlights a clear shift in sentiment and investment strategies within the cryptocurrency space among venture capital players.
