Sequoia partner says investing in FTX was the right move

Sequoia Capital’s Alfred Lin defended the firm’s investment of $213.5 million in the crypto exchange FTX, which has since filed for bankruptcy. During Bloomberg’s Tech Summit, Lin expressed that if given the opportunity to evaluate FTX again, Sequoia would likely make the same investment decision. He stated, “I thoroughly analyzed our actions from multiple perspectives, and it is probable that we would have invested again.”

Sequoia Capital manages approximately $85 billion in assets and has investments in prominent technology companies as well as various crypto ventures.

The venture capital firm allocated a total of $213.5 million across two of its funds for investments in FTX and FTX US. The Global Growth Fund III accounted for a $150 million investment in FTX, equivalent to 3% of the fund’s capital. The Capital Global Equities Fund invested $63.5 million in both companies, representing less than 1% of its entire portfolio.

Following FTX’s closure, Sequoia Capital notified its partners in November of the complete loss of both crypto exchange investments. In a letter, the firm explained that risk-taking is inherent to its business, acknowledging that while some investments exceed expectations, others can result in losses. Lin reiterated this perspective at Bloomberg’s event, emphasizing Sequoia’s trust in founders and its strategy of making calculated risks. Despite the setback with FTX, Lin conveyed the firm’s ongoing enthusiasm for cryptocurrency.

Aside from the financial loss, FTX has generated additional challenges for Sequoia Capital. Some users of the bankrupt exchange have filed a lawsuit against the backers of the platform, including Sequoia, Thoma Bravo, and Paradigm. The lawsuit alleges that the firms were involved in a promotional marketing campaign in 2021, contributing to the perceived legitimacy of FTX. All three firms participated in FTX’s $900 million Series B funding round in July 2021, which was the largest fundraising event in crypto history.

source