Sequoia Capital scales back crypto fund by $350M amid industry challenges – reports

In response to a considerable shift in the startup ecosystem, Sequoia Capital, a renowned venture firm, has significantly scaled back its cryptocurrency fund.

According to individuals familiar with the matter, the fund has been cut from $585 million to a leaner $200 million, as reported by the Wall Street Journal (WSJ.)

This substantial reduction is part of an extensive downsizing strategy that the firm is implementing as it grapples with challenges in the startup industry.

The WSJ noted that Sequoia’s decision to downsize its funds, shared with its investors earlier this year, was driven by a change in market dynamics. The venture firm aims to adapt its approach to better align with the evolving landscape, planning to concentrate more on backing early-stage startups.

According to the Financial Times, Sequoia is retrenching in light of a steep inversion in private markets, and this move is also designed to provide liquidity to its limited partners.

Sequoia’s reduction is not confined to its cryptocurrency fund alone. According to WSJ, the firm also trimmed its ecosystem fund, which invests in other venture funds, from $900 million to $450 million.

The downsizing of its crypto funds comes in the wake of past crypto setbacks. Notably, in Nov. 2022, the firm had to write off its over $200 million investment in FTX, the cryptocurrency exchange, as worthless.

Despite running due diligence when FTX’s revenue was approximately $1 billion, its collapse led to its value diminishing. However, Sequoia highlighted that its exposure to FTX was less than 3% of its Global Growth Fund III, and the loss was mitigated by gains of $7.5 billion from the fund.

According to the WSJ, Sequoia has maintained that it might still invest in crypto via its other funds.