Sequoia Capital’s partner, Alfred Lin, has defended the firm’s investment of $213.5 million in the now-bankrupt cryptocurrency exchange FTX. Speaking at Bloomberg’s Tech Summit, Lin stated that if given the opportunity to evaluate FTX again, Sequoia would likely make the same investment decision.
Despite the loss incurred, he emphasized that the venture capital firm remains enthusiastic about the potential of cryptocurrency.
Sequoia Capital manages approximately $85 billion in assets and has investments in prominent technology companies as well as several crypto ventures.
In the case of FTX, the firm invested $150 million through its Global Growth Fund III, accounting for 3% of the fund’s capital.
Additionally, the Capital Global Equities Fund invested $63.5 million in both FTX and FTX US, representing less than 1% of its entire portfolio.
Last November, Sequoia informed its partners that both of its investments in FTX had been categorized as complete losses following the exchange’s closure.
However, the firm’s investment strategy revolves around trusting founders and taking calculated risks, understanding that not all investments will yield positive results.
Despite the negative outcome with FTX, Sequoia Capital maintains its enthusiasm for the crypto industry.
Lin reiterated the firm’s investment thesis, emphasizing the importance of founder trust and acknowledging that unsuccessful investments are part of the risk-taking nature of the business.
Nevertheless, the FTX investment has brought additional challenges for Sequoia Capital. Some users of the bankrupt exchange have filed lawsuits against the financiers who supported the platform, including Sequoia, Thoma Bravo, and Paradigm.
The lawsuit alleges that these firms participated in a promotional marketing campaign in 2021, contributing to FTX’s perceived legitimacy. Sequoia, along with Thoma Bravo and Paradigm, were investors in FTX’s record-breaking $900 million Series B funding round in July 2021.
Despite the setbacks, Sequoia Capital remains a significant player in the venture capital landscape, with substantial investments in various industries.
The firm’s experience with FTX serves as a reminder of the inherent risks involved in investing, particularly in the volatile and evolving world of cryptocurrency.
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