Sequoia Capital, one of the world’s oldest and most successful venture capital firms, is launching a new crypto-focused fund. This will be the venture capital’s first-ever sector-specific fund since it began operations in 1972.
Shaun Maguire, Partner at Sequoia Capital, told The Block in an interview that the Sequoia Crypto Fund will primarily invest in “liquid tokens”, which are tokens that are already listed on cryptocurrency exchanges and those that are yet to be listed.
The fund’s size is between $500-600 million, and it is part of the bigger Sequoia Capital Fund, which was formed in October 2021, as part of the VC firm’s restructuring. The Sequoia Capital Fund now holds all of the firm’s US and European investments, including stakes in publicly traded companies.
What you should know
In addition to the crypto sub-fund, Sequoia explained that it will continue to invest in cryptocurrency startups out of its main seed, venture, growth, and expansion funds that have over $7.5 billion in total capital commitments.
This is not Sequoia’s first rodeo in the cryptocurrency space. The VC has been investing in crypto since 2015 in both equity and token deals. Last year, 20% of the firm’s new investments in the US and Europe were in the cryptocurrency space in one shape or form.
Its portfolio companies include FTX, Fireblocks, StarkWare, and Filecoin. When asked why it was launching a crypto-dedicated fund now, Shaun Maguire explained that many founders have increasingly asked Sequoia to take a more active role in managing its tokens. He further stated, “This new fund gives us the flexibility to engage even more deeply.”
Asides from investing in and holding tokens, Sequoia will now start staking them, providing liquidity, participating in governance and trading them. The company stated, “Our network of builders at Ethereum, Solana, major DeFi protocols, and beyond have urged us to do the same.”
What they are saying
Michelle Bailhe, another crypto-focused partner at Sequoia, told The Block in the interview that “it’s day one for crypto,” indicating that crypto is still getting started and going to get only bigger from here.
Maguire concurred stating, “we’re still in the absolute beginning. Crypto will be the biggest megatrend in the next 20 to 30 years.”
As for its crypto investment thesis, Sequoia is particularly interested in cross-chain interoperability and GameFi projects, said Maguire, adding that multi-chain is the future.
For interest in specific blockchain protocols, Bailhe stated that Sequoia is monitoring developer activity across networks, including Terra, Avalanche, NEAR, Polkadot and Cosmos, but there still isn’t a clear signal yet which network could witness success like Solana.
The Sequoia Crypto Fund will have the flexibility to invest in projects, but its check sizes could range in the $100,000 to $50 million range, said Maguire.
The fund looks to get fully deployed in under a year if the crypto market enters a bear phase and in more than a year if it enters a bull phase, said Maguire. He also added, “And it really just depends on the quality of investments.”
The Sequoia Crypto Fund is the first sub-fund of the Sequoia Capital Fund. The firm plans to launch two more general funds — the expansion and ecosystem funds. Proceeds from these sub-funds then go back into the Sequoia Capital Fund.