Feb 17, 2022 - Economy

Sequoia Capital launches crypto token fund

Illustration of a tree with money as the leaves.

Illustration: Aïda Amer/Axios

Sequoia Capital last fall disclosed plans to blow up the traditional VC model, saying it would form a single fund to hold all of its U.S. and European investments (including publicly-traded shares).

Driving the news: Now it's laying out its next moves, including a $600 million fund focused on liquid crypto investments.

Background: Sequoia last fall said this open-ended fund would become the sole limited partner for all future "sub-funds," basically creating a loop whereby the main fund and sub-funds would continuously feed each other.

  • The move shook other VC firms, judging by our inbox, as Sequoia is almost universally viewed as the industry's best-in-class.
  • It now is laying out plans for its first three sub-funds under this new structure, having sent PPMs/allocation requests out this morning, and they aren't just continuations of existing strategies.

Crypto Fund ($500 million–$600 million): This is a brand new strategy that will focus on liquid crypto investments (i.e., tokens), and is enabled by Sequoia recently becoming a registered investment advisor.

  • "We could buy these out of our seed or venture or growth funds and be mostly passive, and have done some of that, but it's not really what LPs or the crypto community wants," Sequoia's Alfred Lin tells Axios. "This fund will let us manage these tokens differently, from staking to voting rights and having a say on governance."
  • Lin adds that around 20% of Sequoia's investments over the past year have been for crypto startups, and that such deals will continue at a brisk pace.

Ecosystem Fund ($900 million–$950 million): This is basically a fund-of-funds, to back both Sequoia scouts, funds formed by Sequoia alums and also some third-party efforts. This isn't completely new for Sequoia, which for example has backed Y Combinator funds, but this is a supercharging of those efforts.

Expansion Fund ($3.2 billion–$3.5 billion): This is a regional iteration of what Sequoia previously called its Global Growth funds, and isn't likely to begin deploying capital until late this year. Specific focus here on U.S. and European companies.

  • Lin said that if Sequoia China or Sequoia India ever choose to adopt this new fund strategy, they'd likely do it on their own, separate from the Silicon Valley mothership.

The bottom line: The only real question after last fall's announcement was if LPs would buy into something so novel, even if it was coming from Sequoia. The answer was a resounding yes, with Lin saying that 95% of existing LPs agreed to roll over into the new umbrella fund.

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