In a recent turn of events, venture capital heavyweight, Sequoia Capital, has drastically downsized its cryptocurrency fund by more than 65%—taking it from an impressive $585 million to a more grounded $200 million, as reported by The Wall Street Journal. The same source cites that the company’s ecosystem fund has also seen a significant decrease, diminishing down to half its initial size from $900 million to $450 million.
Earlier this year, in the throes of an unpredictable crypto market, Sequoia Capital shared its strategic decision to keep pace with the ever-changing market environment by renewing its focus on nascent start-ups rather than pouring investments into larger companies. This move off the beaten path follows a series of unfortunate events, one of them being the high-profile $150 million investment in the now-defunct crypto exchange, FTX. The venture fund, under these circumstances, had no choice but to expunge its entire FTX investment.
The financial juggernaut has also allegedly parted ways with seven of its operational team members due to the downsized funds. According to the chief operating officer, Sumaiya Balbale, this decision impacted a third of the recruitment team that assists start-ups in Sequoia’s portfolio. During the heydays of 2021 and 2022, the company’s talent requisites tripled, the workforce doubled, but sadly, a downturn shortly ensued. The ensuing hiring freeze for start-ups culminated in the downsizing.
Change has been the only constant for this firm as it forges ahead amidst these testing times. Balbale paints a picture of the layoffs as a part of the firm’s larger restructuring effort to pivot from offering one-to-one support to a model that optimizes and extends assistance to more founders. Meanwhile, Sequoia Capital has seen an exodus of some pivotal players, with five partners, including Moritz and other crypto investors, exiting the firm.
Sequoia Capital’s decision to scale back its output mirrors a wider trend in the market. Venture capital firms are following suit, retracting on their crypto investments. During Q2 of 2023, VC firms staked $2.3 billion in crypto and blockchain firms, reflecting a steep descent from $8 billion during the corresponding period a year earlier. This amount is touted as the lowest quarterly investment since Q4 of 2020, a far cry from the zenith of $13 billion invested in the crypto space during Q1 of 2022. The future strategies of these investment giants remain to be seen as they navigate these turbulent markets.
Source: Cryptonews
