As crypto continues its meteoric rise, legendary VC firm Sequoia is competing not only with the a16z of the world, but with a growing number of crypto VCs that are seeing their assets grow and their influence upend traditional VC hierarchies. Talking about the new TechCrunch web3 podcast Chain reactionSequoia’s crypto partner Sean Maguire spoke about the firm’s commitment to the sector, regulatory issues, and what many crypto investors still don’t understand.
Earlier this year, Sequoia announced the creation of a $500 million to $600 million sub-fund dedicated solely to buying up cryptocurrencies. The firm has made a number of equity investments in crypto startups over the years, including Fireblocks and FTX, but while Andreessen Horowitz invested early in a dedicated crypto fund in 2018, Sequoia has continued to invest in equity through its general funds.
As the crypto industry continues to mint new unicorn startups, the rapid cooling of tech stocks on the public market threatens to stall growth in an emerging category that has so far proven terribly susceptible to macroeconomic conditions. In our conversation, Maguire emphasized his belief that many other funds plunging into crypto will “fall back” when the market becomes less frothy, but he believes Sequoia has already committed to a long-term relationship with the sector – “we have ongoing intentions” .
“Sequoia is very thoughtful about everything we do, and we spend a huge amount of time discussing every change in strategy, everything, we discuss every seed investment in sometimes excruciating detail, but it helps us make really good decisions and make decisions as a team, not as individuals,” Maguire tells us. “When we make a decision to do something, it doesn’t happen unless the whole team is behind the decision. So here’s what you’ve seen in cryptocurrencies over the last 18 months: we’ve gone from some people with really strong positive views to having the whole firm behind it.”
Cryptocurrency has dealt with many naysayers, some of them in the venture capital community, who believe that the benefits of the sector are exaggerated and that web3’s decentralization promises are just smoke and mirrors.
“I am an absolute crypto-maxi, but I think there are a lot of things that the masses get misunderstood today,” Maguire said. “Decentralization is not a silver bullet that just solves all problems and helps in everything. You know that for the vast majority of computing, you want it to be centralized. For many decisions, centralization may be better for certain types of decisions.”
More important than decentralization itself, Maguire said, is the ability for users to “be able to get away with their identity and data,” which should protect consumers from overreaching the platform. While decentralization provides some type of consumer protection, Maguire still argues that the rulebook of traditional investor protection should not be discarded.
“One of the controversies I have in my mind is that I think people sometimes forget that a lot of the consumer protection measures enacted by US law have been learned from hard-earned lessons over nearly a century. And there is a lot of wisdom in that,” says Maguire. “In a way, one way to see what’s happening in crypto right now is almost like throwing away all the old rules and starting from scratch. go back to 90% of the situations and realize that “Oh, actually, the way things were done in the past were actually quite good and happened for the best possible reason”, but 10% are radically different and…greatly improve the whole system by making some of these things are right.”
Credit: techcrunch.com /