Sequoia Capital reduces entire $214 million stake in FTX to zero

The venture capital firm assured its partners that it had carried out a rigorous due diligence assessment when investing in FTX, finding that the exchange could generate $1 billion in revenue and $250 million in operating revenue.

Venture capital firm Sequoia Capital tweeted a letter sent to its partners on November 10 revealing that the company had reduced its $213.5 million investment in FTX and FTX US to $0, calling it a loss total.

The letter said the crisis facing FTX had “created solvency risk,” but said its exposure to the exchange was “limited” in its Global Growth Fund III, where its cost base for the FTX portion of the fund amounted to $150 million. .

Here is the note we sent to our LPs in GGFIII regarding FTX. pic.twitter.com/Cgp1Yxk1pz

Sequoia also reassured its partners that delisting FTX would not negatively impact the fund, saying it represented less than 3% of committed capital, adding:

"The $150 million loss is offset by approximately $7.5 billion of realized and unrealized gains in the same fund, so the fund remains in good shape."

The venture capital firm also said it invested $63.5 million in FTX and FTX US from its Sequoia Capital Global Equities fund, but the holdings represented less than 1% of the overall portfolio.

Sequoia's investments in the now cash-strapped cryptocurrency exchange were part of FTX's $900 million Series B investment round in July 2021, which was largest crypto investment ever at the time.

When it comes to the investment decision, Sequoia reassured its partners that it thoroughly researches every investment with thorough diligence, and FTX was no different:

"At the time of our investment in FTX, we conducted a rigorous due diligence process. In 2021, the year of our investment, FTX generated approximately $1 billion in revenue and over $250 million in operating income."

"We are in the business of taking risks. Some investments will surprise...