Overview of Sequoia's Cryptocurrency Investment Landscape: A Total of 68 Investments, with a Clear Acceleration in Deployment
Written by: Karen, Foresight News
"The track is more important than the player," is a succinct summary of the investment style of Sequoia Capital and its founder Don Valentine.
As one of the oldest and most successful top venture capital firms in Silicon Valley, Sequoia Capital has invested in some of the most dazzling companies in the internet and fintech sectors, including Atari, Cisco, Yahoo, Google, Oracle, NVIDIA, PayPal, LinkedIn, Stripe, YouTube, and Instagram.
In recent years, with the rapid development of the cryptocurrency sector and the rush of traditional institutional giants to enter the market, attention to the cryptocurrency field has further intensified. A brand new disruptive era may be gradually unfolding. Meanwhile, Sequoia Capital's strategy in this field has shifted from "early exploration" to "full embrace," beginning to follow in the footsteps of Andreessen Horowitz (a16z) and making significant bets in the cryptocurrency space, including but not limited to investing in crypto companies, abandoning the 10-year cycle model for aggressive adjustments to fund structures, applying to become a registered investment advisor (RIA), launching hundreds of millions of dollars in crypto funds, and releasing NFTs. The rapidly rising Move-to-Earn game STEPN is one such investment co-led by Sequoia Capital India.
This article will break down Sequoia Capital and its entities in Europe, the U.S., China, and India in the cryptocurrency field (including the metaverse) and summarize the 68 projects or companies these three entities have invested in within the cryptocurrency sector.
The number of investments made by these three entities in this field is roughly comparable, each making just over twenty investments. Notably, Sequoia Capital India has significantly accelerated its pace this year, investing in 11 projects, including Polygon, STEPN, the electronic signature protocol EthSign, the YGG India sub-guild IndiGG, the key infrastructure solution Web3Auth, the Polygon-based P2E game Ethlas, and the Flow-based cricket NFT marketplace FanCraze, accounting for more than half of the total number of crypto investments (21) made by this entity. Sequoia Capital (Europe and the U.S.) has also stepped up its efforts, investing in 7 projects this year, including EthSign, the Solana ecosystem NFT marketplace Magic Eden, and the cross-chain interoperability protocol LayerZero Labs. In its 4 investments in the cryptocurrency field this year, Sequoia Capital China has made two investments in metaverse infrastructure companies.
Additionally, Sequoia Capital and Sequoia India have diversified their investment categories, engaging in gaming, the metaverse, cross-chain, trading platforms, NFTs, DeFi, Web3, public chains, security, domain names, scalability, wallets, and storage, while Sequoia China tends to focus more on underlying infrastructure.
In terms of DeFi and gaming investments, Sequoia has also begun to pay special attention to projects on Solana. Sequoia Capital has invested in the social blockchain game Faraway Games and the NFT marketplace Magic Eden, while Sequoia India has invested in the Solana ecosystem game STEPN, the blockchain explorer and data analytics platform Solscan, and Socean Finance. Sequoia China has invested in a decentralized trading protocol and wallet on Solana. Furthermore, Sequoia Capital and Sequoia India have also turned some attention to projects on Flow, Cosmos, Parallel Finance, and Arbitrum.
Overview and Structure of Sequoia
Sequoia Capital was founded in 1972 by Don Valentine, the father of Silicon Valley venture capital, and has a history of half a century. At the time of its founding, the term "Silicon Valley" had only been in use for less than two years. The name "Sequoia" was chosen by Don Valentine to symbolize the company's hope to grow robustly like the sequoia tree.
Don Valentine used Sequoia's first $3 million fund to invest in established gaming company Atari and Apple. Subsequent typical investment cases included Cisco, Google, Instagram, Airbnb, Stripe, and Yahoo. Although Don Valentine handed over control of the company to Doug Leone and Michael Moritz in 1997, his investment philosophy of "the track is more important than the player" and "value investing" has had a significant and lasting impact on Sequoia and many investors.
While Sequoia has reaped substantial profits, the remarkable achievements of its portfolio companies are also evident. Additionally, according to Sequoia's statistics, startups that raise seed funding through Sequoia have a fourfold higher chance of successfully raising Series A funding. Over the past decade, 99% of companies that received seed funding from Sequoia are still operating or have been acquired, and the valuations of seed and Series A companies supported by Sequoia are, on average, about twice as high in their next round of funding.
Sequoia Capital currently has business entities in Europe, the U.S., China, and India, in addition to two other entities: Sequoia Capital Global Equities (SCGE) and the Heritage Fund.
In 2012, after Michael Moritz stepped down from daily operations, Doug Leone became the sole leader of Sequoia. Earlier this month, Sequoia Capital announced that Doug Leone would resign from his position as Senior Managing Partner, with Roelof Botha, the managing partner of Sequoia's U.S. and European operations, taking over on July 5. Doug Leone previously led investments in companies such as YouTube, 23andMe, MongoDB, Natera, Square, and Unity.
Additionally, Shen Nanpeng will continue to serve as Global Managing Partner and Founding and Managing Partner of Sequoia China, overseeing the Chinese business. Each Sequoia entity will continue to be led by a local managing partner, with Roelof Botha continuing to lead Sequoia's U.S./European entity and Shailendra Singh leading Sequoia India.
Sequoia's Cryptocurrency Investment Matrix
Sequoia Fund Structure and Transformation Adjustments
October of last year marked a critical turning point for Sequoia Capital. Sequoia announced a fund structure adjustment, abandoning the 10-year cycle model typical in the venture capital industry for its U.S. and European operations, and restructuring into the Sequoia Capital Fund. This means that the fund's investments in companies will no longer have an expiration date, freeing them from the constraints of the 10-year cycle mechanism that would force them to end relationships with companies, allowing Sequoia to establish longer-term, deeper relationships with these companies and to join their boards to help them develop better.
In addition, to increase the flexibility and adaptability of investment activities, Sequoia Capital has also applied to transform into a registered investment advisor (RIA), similar to a16z, including investments in secondary markets or initial public offerings. In January of this year, Sequoia Capital was approved by the U.S. Securities and Exchange Commission to register as an investment advisory firm.
After the transformation, Sequoia Capital can escape the 20% investment scale limit imposed by the U.S. Securities and Exchange Commission on high-risk investment areas, enabling it to increase investments in emerging asset classes, such as cryptocurrencies and seed investment programs.
Sequoia Launches a Dedicated Cryptocurrency Fund
According to Crunchbase statistics, Sequoia Capital has raised a total of $19.8 billion through 31 funds, with the latest fund being a $600 million cryptocurrency fund (a sub-fund of Sequoia Capital Fund) announced in February of this year, marking Sequoia's first industry-specific fund since its establishment in 1972.
Sequoia Capital partner Shaun Maguire stated in an interview with The Block that the Sequoia cryptocurrency fund has a high degree of investment flexibility, primarily investing in liquid tokens, including tokens listed on cryptocurrency exchanges and those not yet listed, with individual project investments ranging from $100,000 to $50 million, and plans to participate in processes from staking to providing liquidity to governance.
In addition to the cryptocurrency sub-fund, Sequoia Capital will continue to invest in cryptocurrency startups through its main seed fund, venture fund, growth fund, and expansion fund, with total capital commitments exceeding $7.5 billion.
Next, we have compiled and summarized the investment projects of Sequoia's three entities in the cryptocurrency field through official channels, Crunchbase, CB Insights, IT Juzi, Qichacha, and other public information.
Sequoia Capital (Europe and U.S.)
In the investment categories on Sequoia Capital's official website, a dedicated "Cryptocurrency" category has been established. Currently, the selected cryptocurrency investment portfolio published on the website includes 12 projects, including the underlying Layer 1 blockchain DESO where BitClout is located, the Solana-based multiplayer game project Faraway Games, Filecoin, Fireblocks, FTX, the domain system Handshake, the privacy public chain Iron Fish, LayerZero, Parallel Finance, the privacy collaboration platform Skiff, StarkWare, and Strip Finance.
Information statistics source: Sequoia official website, CB Insights, and Crunchbase
According to incomplete statistics, Sequoia Capital has invested in 25 projects in the cryptocurrency field, with five cryptocurrency investments publicly announced in March, including the Web3 application extension and privacy system Espresso Systems, the electronic protocol signing agreement EthSign, the Solana ecosystem NFT marketplace Magic Eden, the privacy-limited collaboration platform Skiff, and the cross-chain interoperability protocol LayerZero, completing a total of 7 investments in the cryptocurrency field this year.
Excluding Block, Robinhood, Citadel Securities, and Stripe, Sequoia Capital began exploring the cryptocurrency field as early as 2017, when Filecoin raised $52 million from 150 investors through advisory sales (with a single token price of $0.75), reaching a peak increase of 313 times, and currently, based on the current price, the increase is over 30 times, with Filecoin's fully diluted valuation reaching $48 billion.
Of course, after identifying promising investment targets, Sequoia Capital also makes follow-up investments, such as in Ethereum Layer 2 developer StarkWare, where Sequoia began investing in the project's founding year and subsequently made two additional rounds of investment, with the last round leading a $50 million financing. Similarly, follow-up investments were made in digital asset custody, transfer, and settlement platform Fireblocks, mainstream cryptocurrency trading platform FTX, and privacy collaboration platform Skiff.
In addition, Sequoia Capital has also (co-)led investments in the metaverse platform Gather, Fireblocks, the game Galaxy Fight Club, the cryptocurrency savings project Multis, the Polkadot ecosystem lending project Parallel Finance, and StarkWare.
Sequoia Capital India
In 2006, Sequoia Capital acquired the Indian venture capital firm Westbridge Capital Partners, which was later renamed Sequoia Capital India.
According to Crunchbase statistics, Sequoia Capital India has raised $3 billion through 8 funds, with a total of 557 investments. Combining data from CB Insights and Crunchbase, Sequoia Capital India has made 21 investments in the cryptocurrency field, with 11 investments made just this year, including 5 in the cryptocurrency sector among the 11 investments publicly announced in March, indicating a clear acceleration in Sequoia Capital India's layout in this field.
Information statistics source: Sequoia official website, CB Insights, and Crunchbase
Among these investments, Sequoia Capital India has made two rounds of investment in the Indian cryptocurrency exchange CoinSwitch Kuber and the Flow-based cricket NFT marketplace. The projects led (or co-led) include Band Protocol, Beta Finance, EthSign, Polygon, pSTAKE, and STEPN.
Notably, Sequoia Capital India has achieved significant (potential) returns on its investment in STEPN, with GMT currently experiencing an increase of nearly 250 times compared to its IEO price ($0.01).
Sequoia Capital China
Sequoia Capital China was established in 2005 and has invested in hundreds of companies and projects across various fields, including Alibaba, JD.com, Vipshop, Meituan, and NIO. In November of last year, Shen Nanpeng stated in an exclusive interview with LatePost that deep technology and hard technology fields such as artificial intelligence, high-end manufacturing, and healthcare have already surpassed 80% of Sequoia China's investment portfolio.
According to Crunchbase data, this entity has raised $13.5 billion through 35 funds, with a total of 867 investments. Through the compilation of data from IT Juzi and Crunchbase, Sequoia Capital China has invested in 22 projects in the cryptocurrency field, with representative investments including cryptocurrency financial service providers Amber Group and PayPal Financial, game developer Animoca Brands, cryptocurrency trading platforms FTX and Huobi, mining giant Bitmain, cross-chain protocol Multichain, and public chains Conflux, Nervos, and Ontology.
This year, Sequoia Capital China also invested in two metaverse infrastructure companies, Next Generation Culture and Yuanxiang XVERSE, the latter founded by former Tencent Group Vice President and AILAB Dean Yao Xing, aiming to build a next-generation 3D content production and consumption platform.
Information statistics source: Sequoia official website, IT Juzi, and Crunchbase
Conclusion
"Cryptocurrency will be the biggest trend in the next 20 to 30 years, and 20% of Sequoia Capital's new investments in the U.S. and Europe are in cryptocurrency projects. In terms of its cryptocurrency investment themes, Sequoia Capital is particularly interested in cross-chain interoperability and GameFi projects, adding that multi-chain is the future. Sequoia is monitoring developer activity across networks, including Terra, Avalanche, NEAR, Polkadot, and Cosmos." Sequoia Capital partner Shaun Maguire stated.
If beginning to invest in cryptocurrency projects was Sequoia's initial exploration of the cryptocurrency field, then adjusting the fund structure and launching a dedicated cryptocurrency fund undoubtedly marks Sequoia Capital's full embrace of the cryptocurrency sector.
In the cryptocurrency field, can Sequoia Capital continue its value investing and keen style while leading investment trends? Let us wait and see. Meanwhile, with the continuous penetration and layout of large venture capital firms like a16z and Sequoia Capital in the cryptocurrency field, it is expected that more venture capital firms will gradually follow suit.