Sequoia Capital Partner Maguire: Crypto will be the biggest trend in the next 30 years
Author of this article: Gu Yu, chain catcher
After investing in multiple encryption projects, Sequoia Capital, a well-known venture capital institution, officially launched an independent encryption investment fund on February 17, mainly investing in liquidity tokens and digital assets, which caused a huge stir in both the venture capital circle and the encryption industry. repercussions.
Although the scale is only 500-600 million US dollars, accounting for less than one tenth of its total management scale,But this is Sequoia's first industry-specific fund since its founding in 1972.In October last year, Sequoia Capital stated that it was breaking the traditional organizational structure based on the fund cycle, and established a Sequoia Capital Fund that supports an open liquid investment portfolio and a single permanent structure through registered investment advisors.
“This new structure removes all artificial time frames about how long we can work with companies. It allows us to participate on their boards and help them realize their potential over the course of decades.” Sequoia Capital express.
Sequoia Encryption Fund is the first sub-fund of Sequoia Capital Fund, and it is also the first public progress of Sequoia’s aforementioned reforms. Next, Sequoia Capital also plans to set up an expansion fund and an ecosystem fund. “We want to strike a balance where we can act quickly and flexibly with expert-level crypto knowledge, and make sure] that knowledge is being shared across Sequoia Capital,” said Michelle Bailhe, partner at Sequoia Capital.
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1. Adding to the encryption track, Sequoia Capital is serious
How much does Sequoia Capital value the encryption track? This can be seen in the latest interview speech of Maguire, partner of Sequoia Capital. In an interview with The Block,Maguire affirmed that cryptocurrency will become the biggest trend in the next 20-30 years.
This is the conclusion Sequoia Capital has reached after exploring the encryption track for nearly 8 years. Since 2014, Sequoia Capital has been exploring the entire track, investing in multiple cryptocurrency projects through equity and token transactions. Among them, the encryption projects invested by Sequoia Capital China include Huobi, Bitmain, Nervos Network, Conflux, Animoca Brands, etc., and the encryption projects invested by Sequoia Capital itself include Filecoin, FTX, Fireblocks, StarkWare, BitClout, Iron Fish, Parallel Finance, etc.
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Some crypto projects invested by Sequoia Capital in the past year
As far as the main body of Sequoia Capital is concerned, according to incomplete statistics from Chain Catcher, the institution has made 12 investments in at least 10 projects since the beginning of last year, and the investment types cover almost most mainstream tracks, including Layer1, Layer2, NFT, CeFi , DeFi, privacy, etc.According to disclosures, more than 20% of Sequoia Capital's entire institutional investment in 2021 has entered the cryptocurrency field in the United States and Europe.
In addition, focusing on early investment in top projects, Sequoia Capital also began to invest in early projects with relatively low valuations after November last year, reflecting the further expansion of Sequoia Capital's participation in the encryption industry.
It is worth mentioning that last December, Sequoia Capital also cast YouTube’s original investment memo in 2005 as an NFT and auctioned it on OpenSea to commemorate YouTube’s role in the development of the Internet and celebrate the unpredictable nature of basic technologies such as encryption. Advantage.
In January of this year, Sequoia Capital briefly changed its official Twitter profile from "We help people with courage to build legendary companies, from ideas to IPOs." to "We help people with courage build legendary DAOs, from ideas to to token airdrops.”
So, how does Sequoia Capital specifically view the encryption industry? We can get a glimpse of it from an article that the agency talked about in December last year about the aforementioned minting NFT incident.
The rise of the blockchain echoes the rise of the Internet itself. The direct and free flow of information between people lays the foundation for the direct and free flow of value on the blockchain. This is as much a cultural and psychological shift as it is a technological shift that will enable a new economic reality around the world. In the world of NFT, anyone can create digital assets and anyone can invest, which brings unprecedented diversity to asset valuation and transactions.
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In the next phase of digital evolution, the role of distribution gatekeepers will diminish. Creators will gain control over assets and transfer them from aggregators to network participants. But blockchain's impact extends far beyond the way currencies and digital goods are valued and traded.Decentralized protocols and new entities like DAOs could reshape everything from how products are built to how people communicate and create communities.
We cannot predict the scope of the change or how it will reshape the culture. At these early stages, we don't know what will catalyze the crypto, or which direction it's headed. These catalysts may be technological, regulatory or cultural. It’s unclear whether this shift is coming from the world’s new diversity of currencies, or from blockchain-powered decentralized applications — or both.
But it seems clear that,Blockchain technology is beginning to form new protocols for digital interactions at a fundamental level.Innovation is accelerating at the application level above layer 1 blockchains, and at the application layer below layer 1: one of the most exciting developments we have seen is the pursuit of a protocol that enables different blockchains to Blockchains can interoperate fluently. This work can be compared to TCP/IP for encryption. What this could unlock, we can only imagine. Early web enthusiasts knew it would change everything, but they couldn't have foreseen stock trading on the iPhone. The same goes for encryption today.
In an article "Ask Not Wen Moon–Ask Why Moon" written by Sequoia Capital partner Michelle Bailhe at the end of 2021, she also talked about her views on the development stage of the encryption industry:
Blockchain will rewrite the way we own, sell, buy, trade, exchange and reward.As software permeates our world, cryptocurrencies (software money) will also permeate money and everything we do with it.
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Phase One: Isolation. Encryption acts as an island, disconnected from the non-encrypted world. Crypto builds the core protocols themselves (think TCP/IP for the internet, and layer 1 blockchains like Bitcoin, Ethereum, and Solana for encryption). Protocols are inseparable from their native tokens, and various tokens create a need for exchanges and additional financial services. Most established players lack the technical and regulatory will to meet this demand, allowing cryptocurrency natives to fill the gap. The crypto-native analogs of each financial service appear roughly in their historical order: currencies, foreign exchange, lending, derivatives, insurance, options, ETFs, etc.
Phase Two: Connectivity. Connect encrypted and non-encrypted worlds. The non-crypto world sees the value in crypto and builds/buys infrastructure to access it. Custody/wallets, crypto on/off channels, data feeds, blockchain-specific infrastructure and development tools have grown exponentially during this time. New use cases from NFT art communities to games to Web3 social networks attract new users. As the mass market begins to participate in the crypto market, competitive pressures greatly simplify the user experience and lower barriers to access.Over the next decade, the number of users and developers with access to encryption will increase 10-100 times. We think we're in phase two, which is just getting started.
The third stage: maturity. A fusion of the crypto and non-crypto worlds so they are no longer different. As with mobile devices, once encrypted access is common enough, apps will have the foundation needed to realize their full potential. They will bridge the gap from crypto to everyday life. It needs to be clear that there are already many people building in consumer finance, DeFi, NFT, Web3 and other fields, but only a few hundred million people and institutions can access them. As access is expanded, user engagement with the app increases by an order of magnitude.
Based on the above ideas, it is very logical for Sequoia Capital to invest heavily in the encryption industry. The establishment of a separate encryption fund by Sequoia Capital this time will not only continue to maintain investment in the encryption industry, but will also further support the development of the industry from multiple levels such as pledge and governance.
“While we have invested in equity and tokens over the past five years, many project founders have asked us to take a more active role in managing tokens,Including staking, providing liquidity, participating in governance and transacting through their platform."Sequoia Capital said in the announcement, "Our network of builders in Ethereum, Solana, major DeFi protocols and other fields also urged us to do the same."
As for the next investment direction, Maguire said in the interview that Sequoia Capital is particularly interested in cross-chain interoperability and GameFi projects, and that multi-chain is the future. Currently, Sequoia is monitoring developer activity across networks including Terra, Avalanche, NEAR, Polkadot, and Cosmos, among others.
Another Sequoia Capital partner, Michelle Bailhe, said in an interview with CoinDesk that the fund is investing in "full-stack" projects, including Layer 1, Layer 2, data layers, decentralized finance (DeFi), centralized applications, payment , gaming, Web 3, NFTs, and consumer and enterprise infrastructure.
“If the crypto market enters a bear market phase, the fund is expected to be fully deployed within a year, and if it enters a bull market phase, the fund will be fully deployed in more than a year.”Maguire said.
In addition, Maguire also revealed in an interview with the Financial Times,Sequoia Capital to Take '20-Year' Measures on Its Crypto Holdingsfirst level title
2. Venture capital institutions get together to enter the market
In fact, except for Sequoia Capital, most of the world's well-known venture capital institutions have almost entered the encryption industry. Taking the 2021 Top 100 Global Unicorn Investment Institutions List released by Hurun as a comparison, except for a very small number of institutions such as Ali and Tencent, All invested in encrypted projects.
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Tiger Global
Tiger Global was founded in 2001. Its subsidiaries include private equity funds and public equity funds. It is also one of the most famous venture capital institutions in the world and ranks second in the 2021 list of the top 100 global unicorn investment institutions.
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SoftBank Vision
Softbank is one of the most famous venture capital institutions in the world. It is famous for Ali’s thousand-fold return. Other well-known investment projects include Uber, Wework, Didi, ARM, etc., and its current asset management scale exceeds 100 billion US dollars.
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Accel
Accel is an early-stage and growth-stage venture capital firm founded in 1983. Its well-known investments include Dropbox, Facebook, Slack, Spotify, Supercell, etc.
Goldman Sachs
Goldman Sachs
Founded in 1869, Goldman Sachs is one of the oldest and largest investment banks in the world.
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Insight partner
Founded in 1995, Insight Partner is a world-leading private equity investment firm that focuses on investing in mid-to-late stage VCs and growth companies, especially software development companies. At present, the asset management scale exceeds US$30 billion, has invested in more than 400 companies, and completed more than 200 M&A transactions for portfolio companies.
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a16z
Although a16z was founded in 2009, it quickly invested in well-known companies such as Facebook, Twitter, Groupon, and Skype. The amount of funds under management exceeded US$10 billion, making it one of the top venture capital institutions in the world.
At the same time, a16z is also one of the earliest and most invested venture capital institutions to enter the encryption industry. Most mainstream encryption projects such as Coinbase, Compound, Dapper Labs, Arweave, Solana, and Opensea have a16z's investment behind them, and has become the largest in the encryption industry. Influential venture capital institutions.
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Coatue
Coatue is a global investment management firm founded in 1999, focusing on public and private companies in the technology, media and telecommunications industries, with assets under management of US$48 billion.
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USV (Union Square Ventures)
USV is also one of the world's leading venture capital institutions. Since 2003, it has invested in more than 100 companies that use the power of the Internet to reshape the market.
USV has been investing in the encryption track since 2013. The earliest project was Coinbase. Since then, it has also invested in projects such as Algorand, Filecoin, and Blockstack. In the past year, it has led investment in many encryption projects such as Matter Labs, Mirror, Dune Analytics, and 3Box Labs. One of the most active investors in the encryption industry.
In January 2021, USV Partners stated that it planned to invest "approximately 30%" of its new $250 million fund in the crypto industry.
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Lightspeed Venture Partners
Founded in 2000, Lightspeed Venture Capital is a global venture capital fund that has invested in more than 400 companies, one-third of which have been IPO or acquired. Well-known projects invested by Lightspeed Venture Capital include Snapchat, Nest, OYO, GrubHub and other well-known companies, with assets under management exceeding US$10 billion.
Lightspeed Venture Capital is also one of the most extensive traditional venture capital institutions participating in the crypto ecosystem. Since last year, it has invested in DeFi aggregator Zerion, public chain developer Terraform Labs, cryptocurrency market maker Wintermute, Web3 development platform Alchemy, and cryptocurrency exchanges. There are at least 16 encryption projects including FTX.US, Metaverse project Everyrealm, Web3 infrastructure developer Mysten Labs, and Layer2 solution Arbitrum.
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Part of Lightspeed’s crypto portfolio from 2021
In addition, Founders Fund has invested in at least 5 projects including Ethereum Layer 2 developer StarkWare, Polkadot ecological DeFi project Parallel, NFT music platform Royal, NFT trading platform Opensea, and cryptocurrency custody platform Paxos.
DST Global invests in at least 5 crypto projects including encrypted financial service platform Matrixport, encrypted custody and asset management platform Cobo, encrypted exchange and wallet provider Blockchain.com, encrypted retail broker Bitpanda, and encrypted lending company Figure.
Qiming Venture Partners has invested in at least 3 projects, including the cryptocurrency wallet Imoken, the NFT data aggregation platform NFTGo, and the blockchain infrastructure provider InfStones, all of which are leading investors.
IDG Capital has invested in mining machine manufacturer Bitmain, cross-border payment platform Ripple, and cryptocurrency exchange Coinbase. There are at least 7 encryption projects including the stable currency USDC issuer Circle, the cryptocurrency wallet ImToken, the public chain Klaytn, and the encryption security audit company CertiK.
KKR officially invested in the encryption project in December last year, that is, Anchorage, an institutional-level digital asset solution provider, and led the project's US$350 million D round of financing at a valuation of slightly more than US$3 billion. Its press release stated that this is KKR’s first equity investment in the encryption field. Since then, KKR has also been rumored to be interested in investing in chain game developer Animoca Brands.
Generally speaking, most venture capital institutions started investing in the encryption track in the middle of last year, and mainly focused on CeFi and infrastructure projects, and often appeared as lead investors. Of course, limited to the fund structure, most of the investments are equity investments.
As one of the most prestigious venture capital institutions, Sequoia Capital took the lead in adjusting the fund structure and establishing a separate encryption fund. This will send a clearer signal to the venture capital circle that the era of encryption may be coming.
