According to Reuters, partner Alfred Lin stated on Thursday that Sequoia Capital had reduced management fees in two of its new venture funds as it got ready for a slower investing climate.
Rather than using the standard model of capital under management that is used for other Sequoia funds, limited partners (LPs), who made financial contributions to Sequoia Capital's crypto and ecosystem funds that were launched early last year, are now able to pay management fees based on capital deployed. Investors were informed of the modifications to the fee structure in December.
Sequoia revealed a $950 million ecosystem fund to promote scouts and funds started by Sequoia alumni in addition to a $600 million crypto fund to invest in cryptocurrency businesses and tokens. 10% of the cryptocurrency fund, according to Lin, has already been spent.
With this choice, the largest venture investor in the world conceded in an unusual way after U.S. venture capital deals fell by 31% from their peak in 2021. The dramatic decrease in Internet company values and the ramifications for Sequoia Capital's portfolio business FTX have put the firm's long-standing ties with LPs to the test.
At the StrictlyVC event on Thursday, Lin represented the organization and stated that significant research and due diligence had been done on FTX through internal processes that had been initiated. Lin said:
“We were misled for a variety of situations.”
Reuters reports that the U.S. Regarding FTX's due diligence processes, the Securities and Exchange Commission (SEC) has questions regarding a number of investors. Lin furthered:
“We will invest through a slower time but we will also continue to advance. We are a long-term optimist in crypto and in variety of other sectors.”