Sequoia Capital is launching a $500-600 million crypto fund to invest in tokens

Sequoia Capital, one of the world's oldest and most successful venture capital firms, is launching a new crypto-focused fund — its first-ever sector-specific fund since its founding in 1972.

The Sequoia Crypto Fund will primarily invest in "liquid tokens" — tokens that are already listed on crypto exchanges and those that are yet to be listed — Shaun Maguire, partner at Sequoia Capital, told The Block in an interview.

The fund's size is $500-600 million, and it is part of the bigger Sequoia Capital Fund, which was formed last October as part of the VC firm's restructuring. The Sequoia Capital Fund now holds all of the firm's US and European investments, including stakes in publicly-traded companies.

In addition to the crypto sub-fund, Sequoia will also continue to invest in crypto startups out of its main seed, venture, growth, and expansion funds that have over $7.5 billion in total capital commitments.

Sequoia is becoming more active

Sequoia has been investing in crypto since 2015 in both equity and token deals. Last year, 20% of the firm's new investments in the US and Europe were in crypto. Its portfolio companies include FTX, Fireblocks, StarkWare, and Filecoin. When asked why it was launching a crypto-dedicated fund now, Maguire said many founders have increasingly asked Sequoia to take a more active role in managing its tokens. "This new fund gives us the flexibility to engage even more deeply," he said.

That means instead of just investing in and holding tokens, Sequoia will now start staking them, provide liquidity, participate in governance and trade them. "Our network of builders at Ethereum, Solana, major DeFi protocols, and beyond have urged us to do the same," said Sequoia.

'Day one for crypto'

Sequoia as a firm believes that crypto is more than a sector; it's a fundamental shift that will impact all sectors over the long run.

Michelle Bailhe, another crypto-focused partner at Sequoia, told The Block in the interview that "it's day one for crypto," meaning crypto is still getting started and going to get only bigger from here.

Maguire concurred. He said, "we're still in the absolute beginning. Crypto will be the biggest megatrend in the next 20 to 30 years."

As for its crypto investment thesis, Sequoia is particularly interested in cross-chain interoperability and GameFi projects, said Maguire, adding that multi-chain is the future.

For interest in specific blockchain protocols, Bailhe said Sequoia is monitoring developer activity across networks, including Terra, Avalanche, NEAR, Polkadot and Cosmos, but there still isn't a clear signal yet which network could witness success like Solana.

The Sequoia Crypto Fund will have the flexibility to invest in projects, but its check sizes could range in the $100,000 to $50 million range, said Maguire.

The fund looks to get fully deployed in under a year if the crypto market enters a bear phase and in more than a year if it enters a bull phase, said Maguire. "And it really just depends on the quality of investments," he added.

The Sequoia Crypto Fund is the first sub-fund of the Sequoia Capital Fund. The firm plans to launch two more general funds — the expansion and ecosystem funds. Proceeds from these sub-funds then go back into the Sequoia Capital Fund.