Amid the recent turmoil in the private markets, Silicon Valley-based venture capital firm Sequoia Capital has been forced to retrench and make significant changes to its funds.
The firm has cut the size of two of its funds, including a cryptocurrency vehicle that was raised just last year.
The cryptocurrency fund, which was originally valued at $585 million, has now been reduced to $200 million.
Additionally, the ecosystem fund, which supports smaller venture funds and solo investors, has been halved from $900 million to $450 million. These reductions were communicated to the firm’s limited partners in March this year.
The decision to downsize the funds comes in response to the broad downturn in private technology companies and a liquidity crunch for some of Sequoia’s limited partners.
Limited partners are the investors who provide capital to venture capitalists to invest on their behalf. With the current challenges in the market, Sequoia aims to sharpen its focus on seed-stage opportunities and provide liquidity to its investors.
Sequoia Capital has been experiencing a series of significant changes this year. In June, it announced the split of its Chinese entity as a result of bias between the United States and China.
After an illustrious 38-year tenure at the firm, Michael Moritz, a prominent partner, who played a pivotal role in expanding the company and establishing Sequoia as a top-tier technology investment group, is stepping down.
The venture capital industry is facing a precarious moment, as private markets reset after more than a decade of growth where funds expanded significantly in scope and scale.
The ecosystem and crypto investment funds had been launched by Sequoia in early 2022 when the venture market was thriving.
However, the landscape has since shifted due to rising interest rates, declining economic confidence, and a stall in venture investment and public listings.
The move to downsize the cryptocurrency fund indicates Sequoia’s pivot away from larger crypto players towards early-stage startups as recent challenges in the crypto industry have reduced opportunities for backing larger companies.
Despite the challenges and changes, Sequoia Capital, which has given $15 billion as ROI to investors in three years , said it remains a significant player in the venture capital space, with a long-standing reputation for successful investments.
Venture investors, in general, have become more cautious, and the pace of investments has slowed down due to the scarcity of viable exits. The impact of the ongoing liquidity crunch and market volatility is likely to shape the investment landscape for some time to come.
