(Bloomberg) — Sequoia Capital is launching a cryptocurrency-focused fund of as much as $600 million — the latest sign of venture capital enthusiasm for crypto startups, despite ongoing regulatory uncertainty and market volatility.
“We have a long-term view on crypto that it’s a megatrend over the next 20 years,” said Sequoia Partner Shaun Maguire. “It’s the future of money.”
Sequoia’s move to create a standalone crypto fund is a break from tradition — the 50-year-old firm has never before carved out a specific sector fund — but it was widely expected. The change comes after a broader revamp of the firm’s structure, allowing it greater flexibility to hold positions in public companies and the ability to work around rules that cap venture investments in crypto at just 20% of a fund.
Sequoia, which has embraced the world of crypto, is hardly the only venture firm to do so. Global investors plowed more than $21 billion into the sector in 2021 — more than in every year over the past decade combined, according to research firm CB Insights.
In announcing the crypto fund Thursday, Sequoia said it would be one of three new sub funds at the firm, under the broader umbrella of the Sequoia Capital Fund. The new funds will use capital already committed by Sequoia’s existing limited partners, rather than new funding. Sequoia said that its limited partners — a group that includes university endowments and pension funds — support the changes, electing to roll in 95% of eligible balances into the firm’s new structure. Those limited partners can now decide whether they want to allocate their money to one or more of the sub funds.
Sequoia Partner Michelle Bailhe said the sometimes wild price fluctuations in Bitcoin, Ethereum and other coins didn’t concern her or others at Sequoia because “we’re investing on a 30-year horizon. We’re not an arbitrage firm.”
Lower valuations for startups could be appealing for the firm, according to its partners. “If we’re in a bear market, we could invest [the crypto fund] in under a year,” Maguire said.
The other smaller funds created alongside the crypto investment vehicle are Sequoia’s Ecosystem Fund and Expansion Fund. As much as $950 million will go to the Ecosystem Fund, focused on companies connected to Sequoia, and where the firm will delegate “Scouts,” or third-party investors (including founders and other venture firms) to make investments on its behalf. Sequoia’s Expansion Fund will be as large as $3.5 billion and will fund U.S. and European growth-stage companies. Both the Ecosystem and Expansion funds will back a range of technologies, including crypto.
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