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Sequoia Capital cuts its crypto fund by 65%

sequoia-capital-cuts-its-crypto-fund-by-65
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Sequoia Capital cuts its crypto fund by 65%

VC firm Sequoia Capital has reportedly downsized its crypto fund from $585 million to $200 million amid a liquidity crunch and focus on smaller crypto players.

A report by the Wall Street Journal on July 27 says the tech-focused VC firm Sequoia Capital will scale back its crypto fund. The move was driven by the need to align with the evolving market conditions in the cryptocurrency industry.

One of the primary motivations behind the fund reduction is to lower the capital threshold, making it easier for investors to participate in Sequoia’s fund offerings.

“We made these changes to sharpen our focus on seed-stage opportunities and to provide liquidity to our limited partners,” stated Sequoia in a released statement. Over the past three years, the company has returned more than $15 billion to its investors, highlighting its commitment to delivering results.

The venture capital firm introduced its cryptocurrency fund in February 2022, when the market capitalization of cryptocurrencies was 39.1% lower than its peak at $3 trillion in November 2021.

Unfortunately, Sequoia faced setbacks with its $214 million investment in FTX, the cryptocurrency exchange that collapsed in December last year. This led to a high-profile incident that necessitated a rare apology from the firm to its investors.

Crypto VC investment experiences 70% drop in one year

Sequoia’s reported decision mirrors a wider trend in the venture capital industry, where firms are cutting back on their cryptocurrency investments.

Data released by RootData reveals a significant decline of over 70% in venture capital investments in cryptocurrency companies over the past year.

Sequoia Capital cuts its crypto fund by 65% - 1
Crypto fundraising trends | Source: RootData

In June 2022, the digital asset sector attracted an impressive $1.81 billion in funding through 149 funding rounds. However, in June of the current year, only 88 projects managed to secure a total of $507 million, making it the least funded month to date.

Despite the overall trend of reduced cryptocurrency holdings among venture capital firms, some companies like Polychain Capital and Coinfund have recently raised $200 million and $152 million for their investment and seed funds, showing that not all are shying away from the crypto space.