Just over a year after launching its crypto fund, venture capital firm Sequoia is now rolling back its investments and taking more of a more careful approach. The firm was making some serious waves when it launched its crypto fund last year in February, signaling that crypto was ready for mainstream VC backing. But now the company has reportedly downsized its cryptocurrency fund by 65% as the crypto winter rages on.
Sequoia Pulls Back On Its Crypto Funding
Sequoia Capital, one of Silicon Valley’s most prestigious VC firms, is scaling back its ambitions in the crypto space. After launching a dedicated $585 million crypto fund last year, Sequoia recently announced they’re slashing it by 65% to $200 million.
The firm has also reduced its ecosystem fund by 50%. The fund, which invests in other smaller venture funds and solo investors, is now at $450 million, down from $900 million.
Insiders close to the situation said this is a result of the bear market, which has affected projects across the industry and pulled down prices significantly over the last year.
Why Is Sequoia Taking This Step Now?
Sequoia is known for making investments in crypto companies and had initially announced its funds as part of a larger restructuring effort to increase its investments in the crypto space. The crypto market, however, has seen most projects take a big hit over the last few months and Sequoia wasn’t left out, as it has seen a major part of its investment take drastic losses.
The company was particularly affected by the crash of FTX, as it had a $214 million investment in the failed crypto exchange. Rather than spray and pray with a large fund, Sequoia is now tightening its focus.
Total market cap at $1.14 trillion as VC investments slow down | Source: Crypto Total Market Cap on inew.news
According to the report, the company’s new investment plan is to pivot toward smaller crypto players. The smaller cryptocurrency fund will now focus more on a select group of startup companies.
With the crypto market taking a major downturn since the announcement of its funds, it’s no surprise that Sequoia has decided to scale back. Crypto projects, in particular, haven’t done well in recent times.
According to a recent report by Lattice, a crypto venture fund, only 5% of projects created during the 2021 crypto boom have been able to create Product-to-Market Fit (PMF). More data published by Cointelegraph also shows that the amount of money invested in cryptocurrency startups through venture capital fell by 29.73% in the month of June.
While it shows a lack of faith and reflects the growing trend among venture capital firms, the pullback doesn’t mean Sequoia is abandoning the space altogether. The venture capital firm began its crypto journey in 2014 and has a history of backing innovative technologies early on.