The venture capital firm Sequoia Capital posted on Twitter a letter sent to its partners on November 10 revealing that the company had written down its $213.5 million investments in FTX and FTX US to $0, considering them a total loss.
The letter said that the crisis facing FTX has “created solvency risk” but stated that its exposure to the exchange is “limited” in its Global Growth Fund III.where his cost basis for the FTX portion of the fund was $150 million.
Here is the note we sent to our LPs in GGFIII regarding FTX. pic.twitter.com/Cgp1Yxk1pz
— Sequoia Capital (@sequoia) November 10, 2022
Here is the note we sent to our LPs at GGFIII regarding FTX.
Sequoia also assured its partners that the cancellation of FTX would not have a detrimental impact on the fund, as it represented less than 3% of the capital committed to it, adding:
“The $150 million loss is offset by the ~$7.5 billion of realized and unrealized gains in the same fund, so the fund remains in good shape.”
The venture capital firm also reported investing $63.5 million in FTX and FTX US from its Sequoia Capital Global Equities Fund. However, the holdings represented less than 1% of the entire portfolio.
Sequoia’s investments in the now cash-strapped cryptocurrency exchange came as part of FTX’s $900 million Series B investment round in July 2021, which was the largest cryptocurrency investment ever recorded at the time.
Regarding the investment decision, Sequoia assured its partners that it thoroughly investigates each and every one of its investments with painstaking diligence, and FTX was no different:
“At the time of our investment in FTX, we carried out a rigorous due diligence process. In 2021, the year of our investment, FTX generated approximately $1 billion in revenue and more than $250 million in operating income.”
“We are in the business of taking risks. Some investments will surprise to the upside, and others will surprise to the downside,” the letter explained.
Sequoia added that it will communicate its next moves to its partners when more information is available.
Sequoia Capital currently has about $85 billion of assets under management and has previously made seed investments in tech giants Apple and Google and, more recently, in Airbnb.
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