Sequoia Capital has just reduced the value of its stake in the cryptocurrency exchange FTX to zero — a stake that, since last week, likely reflected one of the most substantial investment gains in the venture firm’s 50-year historical record.
Sequoia said in a comment to Limited Partners published on the company’s Twitter account that its media coverage to FTX is constrained, and that any funds it has ended up losing has been counterbalanced by billions of dollars in gains.
Here is the note we sent to our LPs in GGFIII regarding FTX. pic.twitter.com/Cgp1Yxk1pz
Sequoia Capital stated that it has invested $150 million in FTX.com and FTX.us through its Market Growth III fund, as well as $63.5 million in the exchange and its US section through its SCGE Fund. These assets account for 3% of the Global Growth III fund and much less than 1% of the SCGE fund.
Sequoia invested in FTX’s Series B round in July 2021, at a valuation of $18 billion. Approximately two months later, investors estimated the company’s value at $25 billion. In January of this calendar year, FTX brought up $400 million in a Series C round, which brought its total funding to $2 billion and its pricing to an absolutely staggering $32 billion.
Now, FTX didn’t merely lose its high price tag because of a series of mishaps — that’s the ideal situation. According to the Wall Street Journal, FTX CEO and founder Sam Bankman-Fried told investors today that he needed immediate funds to cover a funding gap of up to $8 billion caused by recent withdrawal requests. He is believed to be searching for a combination of debt and equity.
Sequoia’s decision to write off the investment is not surprising. Other FTX investors, such as BlackRock, Tiger Global, Insight Partners, and Paradigm, are probably mailing out their own information exchange to partnership business today about the same choice.
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