Sequoia Capital has scaled back its cryptocurrency fund to focus more on early-stage startups amid a shift in the startup ecosystem.
Prominent venture capital firm Sequoia Capital has significantly scaled back the size of its cryptocurrency fund in response to a major shift in the startup ecosystem.
The fund has been cut from $585 million to $200 million, according to people familiar with the matter, The Wall Street Journal (WSJ) reported.
The drastic layoffs are part of the company's massive layoff strategy to meet the challenges of the startup industry.
The Wall Street Journal noted that Sequoia Capital shared with investors earlier this year its decision to reduce the size of its fund, which was driven by changes in market dynamics. The venture capital firm aims to adjust its approach to better adapt to the changing landscape, with plans to focus more on supporting early-stage startups.
According to the Financial Times, Sequoia Capital is tightening its spending in light of the sharp reversal in the private equity market, a move also aimed at providing liquidity to its limited partners.
Sequoia’s reductions aren’t limited to just its crypto fund. The firm is also slashing its ecosystem fund, which invests in other venture funds, from $900 million to $450 million, according to the Wall Street Journal.
The reduction in the size of its cryptocurrency fund comes after past cryptocurrency setbacks. Notably, in November 2022, the company had to write off an investment of more than $200 million in cryptocurrency exchange FTX because it was worthless.
Despite conducting due diligence when FTX’s revenue was around $1 billion, its collapse eroded its value. However, Sequoia stressed that its exposure to FTX was less than 3% of its Global Growth Fund III, whose $7.5 billion in gains mitigated the losses.
According to the Wall Street Journal, Sequoia Capital insisted that it may still invest in cryptocurrencies through other funds.
