As part of a substantial restructuring the illustrious venture firm is implementing amid a general decline in startup activity, Sequoia Capital reduced the size of two significant venture funds, including its bitcoin fund.
Those acquainted with the situation claim that Sequoia reduced the amount of its cryptocurrency fund from $585 million to $200 million. The persons added that the company reduced the amount of its so-called ecosystem fund, which makes investments in other venture funds, from $900 million to $450 million.
In order to properly represent the changing market, Sequoia decided to lower the funds, as it informed fund investors in March. An industry downturn eliminated prospects to support larger companies, so the cryptocurrency fund, for instance, will put more of its attention on funding fledgling entrepreneurs.
By reducing fund sizes, Sequoia is cutting the amount of committed cash needed from investors, also known as limited partners, who are already seeing reduced returns from venture funds and are preparing for additional markdowns.
The adjustments reflect the difficult decisions venture companies are having to make during one of the most challenging years in recent memory for the startup sector. As deal-making slows and funds struggle to attract new money, they are attempting to reverse the fast expansion and extravagant spending that characterized a historic startup boom.
After spending months stepping up its investments in cryptocurrencies, Sequoia launched the two funds in February 2022 as part of an ambitious business restructure. Many blockchain firms have since lost money due to the cryptocurrency crisis.
Sequoia, long regarded as Silicon Valley’s leading venture capital company, has a reputation for adjusting its operations to changes in the tech investing landscape while staying one step ahead of competitors. However, the company has seen a number of setbacks under new management, putting its brand under serious duress for the first time in years.
For investing $150 million in FTX, the cryptocurrency exchange that failed last year, the company received a high-profile black eye. According to The Wall Street Journal, Sequoia made an unusual apology to its investors for the investment.
Sequoia has also received criticism from its investors for a poor choice it made in late 2021 to introduce a new fund structure that would let it to hold public stocks rather than liquidate those positions. Sequoia originally said the new strategy would enable it to generate greater profits, but after the technology market fall last year, it was slapped with billions of dollars in paper losses, which hurt its profitability and angered investors.
After the relationship came under increasing criticism from Congress and the White House, Sequoia Capital decided to separate its lucrative China business from its lucrative U.S. and Europe businesses in June. After over 40 years with the company, Michael Moritz, one of Sequoia’s most successful early-stage investors, announced his resignation earlier this month.
