- Sequoia, the VC firm, slashed two venture funds, including the crypto one, plummeting from $585 Mn to $200 Mn.
- This downsizing decision by Sequoia aligns with the ongoing funding winter in the startup ecosystem.
- India’s crypto sector also confronts comparable hurdles, experiencing a mere three funding deals worth $30 Mn in H1 2023.
Sequoia Capital has taken decisive action to adapt to the evolving crypto landscape, strategically reducing its crypto fund by over 65% to approximately $200 million amid the ongoing funding winter. This move reflects the firm’s proactive approach to navigate the challenges faced by the crypto industry, which has witnessed several exchanges and platforms collapsing and increased regulatory scrutiny.
By scaling down two of its venture funds, including the crypto fund, from $585 million to $200 million, Sequoia aims to optimize its focus on seed stage opportunities while providing liquidity to its limited partners (LPs). This strategic decision allows the firm to lower the committed capital required from investors, fostering flexibility in its investment approach.
Sequoia’s revised crypto fund will primarily emphasize new company formation, while also having the opportunity to complement these investments from its seed, venture, growth, and expansion funds as the companies mature. This approach reflects Sequoia’s confidence in the potential of emerging startups within the crypto space.
Moreover, this reduction in the crypto fund is part of Sequoia’s broader downsizing exercise, enabling the firm to adapt to changing market conditions effectively.
While India’s crypto industry has faced similar challenges due to strict government regulations on crypto taxation and TDS on crypto transactions, global market dynamics have also influenced investor sentiment. Despite a robust funding uptick in 2021 and the first half of 2022, the first half of 2023 saw only three funding deals in India’s crypto, blockchain, and Web3 ecosystem, totaling around $30 million raised. This funding shortfall has led to some companies closing their operations.
The global crypto ecosystem experienced a significant decline in the trading value of major cryptocurrencies like Bitcoin and Ethereum in the second half of 2022. However, there have been signs of recovery, with Bitcoin’s price rebounding from its low in November 2022. While challenges persist, investors and industry participants remain optimistic about the long-term potential of the crypto market.
In conclusion, Sequoia Capital’s strategic reduction in its crypto fund exemplifies the firm’s proactive stance in navigating the ever-changing crypto landscape. Despite challenges faced by the industry, there is optimism about the future of the crypto market, with a focus on nurturing promising startups and adapting to the evolving global trends.