Sequoia Capital Exec Shines Light On Due Diligence On FTX Investment

According to partner Alfred Lin on Thursday, Sequoia Capital has reduced management fees in its two most recent venture funds as it prepares for a slower investing climate.

Limited partners contributed money to Sequoia’s crypto and ecosystem funds, which were launched early in 2022. Now they are able to pay management fees based on the capital deployed rather than the standard model of capital under management. The changes in fee structure were announced to investors in December.

How much is Sequoia investing?

In addition to a 600 million USD crypto fund to invest in crypto businesses and tokens, the firm unveiled a 950 million USD ecosystem fund. This is to support scouts and funds established by Sequoia alumni. According to Lin, 10% of the crypto fund has already been used.

The world’s largest venture investor made an uncommon concession with this decision after U.S. venture capital agreements decreased by 31% from their peak in 2021. The sharp decline in internet company valuations and the consequences for Sequoia’s portfolio business FTX have put the firm’s long-standing relationships with Limited Partners to the test.

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Did the VC firm follow the due diligence on FTX?

According to reports, the SEC has inquired about several investors in FTX’s due diligence procedures.

Speaking at the StrictlyVC event on Thursday, Lin said that a thorough investigation and due diligence had been done on FTX, through internal processes that had been started. Lin claimed that they were misled in a number of circumstances.

Sequoia Capital reduced its investment in FTX by 150 million USD from its third Global Growth Fund. Also, by 63.5 million USD from its crossover fund, bringing the total amount invested in FTX and FTX US to zero.

The company will still invest in crypto.

“We will invest even during a slower period, but we also won’t stop growing. We are optimistic about the future of cryptocurrency and a number of other industries,” added Lin.

Also read: Court Allows FTX To Sell Japanese, European Subsidiaries