As of November 2021, the cryptocurrency market in the world was valued at over $3 trillion. This has attracted the attention of investors across the globe, who had pumped in over $21 billion in the sector last year. This, despite increased regulatory tightening and massive volatility in the sector. And now Sequoia, a marquee and sought-after investor in the startup world, is now looking to double down on its crypto fund commitments.
And it is doing so, with the launch of a new fund, which will focus on investments solely in the crypto segment. Aptly termed as the Sequoia Crypto Fund, it will primarily invest in digital assets and liquid tokens and will complement the VC firm’s “broader commitment to crypto.” The size of the fund will be $500-600 million.
With the adoption of cryptocurrencies across the globe, the crypto sector has grown by leaps and bounds. While the prices of popular cryptocurrencies have fallen in recent times, the supposed de-escalation of tensions between Russia and Ukraine has seen the prices rise once again.
Surprisingly, this is Sequoia’s first-ever fund to focus on a specific sector (the crypto sector, in this case) ever since it was founded and started operating in 1972. But it is not the last, instead, it is the first of its sub-funds to invest out of the bigger Sequoia Capital Fund (which was formed in 2021). Sequoia plans to launch two more general funds — the Expansion and Ecosystem funds. These new funds will use capital already committed by Sequoia’s existing limited partners, rather than new funding.
If you are wondering what Sequoia aims to accomplish with this fund, the firm’s goal is clear. It is looking to participate more actively in protocols, better support token-only projects, and “learn by doing ourselves.”
For now, it will continue to work with the crypto community, including providing ongoing support for open-source research. While the Sequoia Crypto Fund will have the flexibility to invest in projects, its check sizes could range from $100,000 to $50 million., highlighting that the firm could well be interested in entering very early in a venture, a rarity for Sequoia. Get ready to see the fund deployed in under a year, provided that the crypto sector enters a bear phase.
Why is it launching the fund now, at a time when there is increased volatility in the market and the prices of cryptos keep fluctuating? According to Shaun Maguire, partner at Sequoia Capital, many have asked the firm to take a more active role in managing its tokens, and the new fund gives it the flexibility for deeper engagement.
This means that Sequoia will also provide services that are not limited to investing and holding them but also include staking them, providing liquidity, participating in governance, and trading through multiple platforms.