Alfred Lin, director at Sequoia Capital, defended the firm’s multimillion-dollar investment in the now-defunct cryptocurrency exchange FTX.
Lin stated at the Bloomberg Tech Summit that Sequoia would likely make the same investment decision if he were tasked with evaluating FTX for the first time again. “I looked at the work we did in 15 different ways; we probably would have made the investment again,” he stated.
Sequoia Capital manages approximately $85 billion in assets, including investments in significant technology and cryptocurrency companies. The venture capital firm invested $213.5 million through two funds in FTX and FTX US.
The Global Growth Fund III held a $150 million investment in FTX, representing 3% of the fund’s capital. In contrast, the Capital Global Equities Fund had investments in both companies totaling $63.5 million, representing less than 1% of its complete portfolio.
After FTX ceased operations, Sequoia informed its partner in a letter sent in November 2017 that both crypto exchange investments had been recorded as total losses. “We are in the business of taking risk. Some investments will surprise to the upside, and some will surprise to the downside,” the letter explained.
Here is the note we sent to our LPs in GGFIII regarding FTX. pic.twitter.com/Cgp1Yxk1pz
— Sequoia Capital (@sequoia) November 10, 2022Lin reiterated the vision at Bloomberg’s event, stating that Sequoia’s investment thesis is based on trusting founders and taking calculated risks, adding that investments do not always succeed. Lin noted that despite FTX’s dramatic collapse and loss of funds, the venture capital firm is “still very excited about the concepts of crypto.”
In addition to the multimillion-dollar loss, FTX caused additional problems for the venture firm. Some users of the defunct exchange are now challenging the platform’s investors, including Sequoia, Thoma Bravo, and Paradigm.
The lawsuit asserts that the defendants participated in a marketing campaign in 2021 and that their efforts lent FTX an “air of legitimacy.” The three firms participated in the exchange’s $900 million Series B round in July 2021, the highest capital raise in the history of cryptocurrencies.
