On February 18, Sequoia Capital announced the launch of a cryptocurrency investment fund with a scale of 500-600 million US dollars. This is Sequoia Capital's first industry-specific fund since its establishment in 1972.

But how did all this happen? Why did Sequoia Capital make a big leap from a traditional first-line US dollar fund, trying to lead Web3 investment?

The answer is simple, someone is pushing and leading, her name isMICHELLE BAILHE。

To a certain extent, she changed Sequoia Capital.

In September 2020, MICHELLE began to actively lead the investment in Crypto after switching from private equity firm Hellman & Friedman to Sequoia Capital.And Lead the investment of FIREBLOCKS and FTX.

In the words of those inside Sequoia Capital,Michelle Bailhe is the real ALL IN CRYPTO!

Another similar partner is Shaun Maguire, who has led the investment of DeSo, ParallelFi, Faraway and other projects.

Therefore, at present, Sequoia Capital's investment in the field of encryption is mainly led by Michelle Bailhe and Shaun Maguire, followed by Alfred Lin, Ravi Gupta and Konstantine Buhler, who also take Crypto as a priority.

At present, some of its portfolios and responsible persons are as follows:

• Michelle Bailh (FTX, Fireblocks)

• Shaun Maguire (DeSo, ParallelFi, Iron Fish, Faraway, Strips, and more seeds in stealth)

• Alfred Lin (FTX)

• Mike Vernal (Starkware)

• Ravi Gupta (Fireblocks)

• Roelof Botha (Square now Block)

• Andrew Reed (Robinhood)

• Stephanie Zhan (stealth seed, Brud acquired by Dapper Labs) 

At least in the second half of last year, Sequoia Capital did not intend to set up a dedicated encryption fund. In Maguire's original words, "We don't want the lessons of crypto to be siloed just in a crypto team (we don't want the lessons of crypto to be siled just in a crypto team)", but the possibility was not ruled out at the time.

Perhaps inspired by a16z, dedicated crypto funds are becoming more popular, according to former a16z Crypto head Katie Haun,It is impossible to be successful in crypto investing without a dedicated team.

We don't care about Maguire's background, etc., but are curious about her views on Web3/Crypto investment,For example, she is particularly concerned about the ability of the company or the founder to tell a story, and believes that the potential of WEB2 entrepreneurs to transform into WEB3 is underestimated. Some of the content comes from past podcast interviews.

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storytelling ability

"Storytelling is an underrated art in most companies, especially in technology. The difference between great companies and legendary companies is that they tell stories about how they make people's lives better."

In Michelle's view, the ability to tell stories is a core competency that is seriously underestimated.

In her words,Humans are a storytelling species, and a story is more useful than other information.

Michelle's father is a film producer, so she understood from an early age that technology and products alone are not enough, and people can understand him.

For example, the success of Google told a story of how to make life better at a very early stage, rather than simply telling us that we are a big company that everyone knows.

Google’s first ad in the Super Bowl is roughly, search in the search box, “how to study abroad in France”, “how to date a girl”, “how to assemble a crib”…

Readers have a beautiful life story in mind, not a boring product.

At present, there are two main narrative logics: one is to tell the story from the perspective of the company to attract curiosity; the other is to tell the story of the company from the perspective of the founder, such as Jobs, Bill Gates and Musk.

In the field of Crypto, Michelle praised FTX founder SBF.

At the Sequoia meeting, she said,One of the things I love about SBF is that he's an amazing storyteller, which is important in creating a truly legendary company.

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WEB3 INVESTMENT

Michelle said that Sequoia Capital is focused on investing in the next era of technology. Next, it will focus on two things. One is to continue to invest in and support great entrepreneurs in the Web 3 and Crypto fields. Second, there is one thing that is seriously underestimated by the public.That is, WEB2 entrepreneurs turn to WEB3, just like switching from PC desktop to mobile, and there will be very successful cases of transformation.

Michelle shared a little story.

In Sequoia’s base camp, all the founders camped overnight together. Among them, the founders of three different fields, from games, consumption and live shopping, all talked to her about NFT, which made her think that these companies may have will move to Web3, just as they have turned to mobile, and those companies that don't will be left behind.

How to Pitch a project?

Michelle said frankly,Most of her investments are found on twitter and then reach out through twitter private messages, For example, I have actively contacted relevant personnel of FTX. And she thinks the most important thing she can do for the companies she helps is to connect them to the right people at the right time.

For Sequoia Capital, there is a question whether venture capital in the WEB3 era will impact Sequoia and other traditional VCs. This seems to be a self-revolution. For example, various cases such as the Constitution DAO provide a new investment paradigm.

Michelle thinks,VC, like all biological systems, either evolves or dies, and Sequoia Capital is always paranoid.

Sequoia has been building a long-term model in which it doesn't have to sell shares or tokens just because a company goes public, a pain point of traditional venture capital.

If LP wants to obtain liquidity, the fund will sell stocks (tokens), etc., which will hurt the founders to a certain extent, especially at certain critical moments; and if the stocks or tokens are sold out, the relationship between the two may end Yes, but founders actually need long-term help. As a VC, Sequoia Capital is not "passive money", but a real business partner.

(Note: In October 2021, Sequoia Capital announced the establishment of a single, permanent fund called Sequoia Fund in the US and European markets, changing the organizational model of traditional funds and no longer establishing a duration for it. Hold public stock for a long time and seek the best long-term returns for LPs, most of which are non-profits and endowments.)

What advice would you give someone who wants to enter this industry?

Michelle said very sincerely,also,。

also,Michelle emphasized that fast execution is very important, rather than spending too much time wasting on thinking and entanglement, This is also what she admires the most about the FTX team. For example, sometimes SBF will ask her some questions. Although she replied within 24 hours, SBF has already solved it early. It seems that she has said a lot of nonsense. Here's a lesson she's learned from some powerful founders.

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Ask Not Wen Moon–Ask Why Moon

2021 was a bumper year for cryptocurrencies: Hundreds of projects launched; thousands of new developers and over 100 million new users entered the crypto space; the total market capitalization of cryptocurrencies increased by $1 trillion; Locked value also reaches $250 billion; NFT sales break records and get featured on SNL; Tom Brady (professional American football player) and wife Gisele's support for FTX sparks interest in cryptocurrencies; PleasrDAO saves Wu Tang Clan album; ConstitutionDAO almost bought the Constitution...  

However, there are still a lot of people who are new to the crypto space asking the same question: what is going on in the crypto space? Is the investment in the encryption field investing in currency or investing in the new Internet? What are the hot new tokens and new NFTs? When will it be TO DAO MOON?

I think a better question is actually:Why the moon? Why Encryption and Web3 Are Booming? Why now? Although the encryption field is indeed worthy of attention as a behemoth with a market value of trillions, why is it important?

While answering these questions might be a Sisyphean task, we try to do it in a few pages. These questions may seem overly simplistic to anyone deep in the field, but we hope to engage more users, developers, operators, and founders by providing a broad overview of the historical context of cryptocurrencies and the mindset of the ecosystem Come in.

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What's happening in the crypto world and why it matters

In essence, currency represents trust. Many of us on this Odaily like to trust their currency and financial system.

We trust our central bank will not devalue our currency overnight. We trust the government to avoid hyperinflation so our currency retains purchasing power. We trust banks to keep our money safe and not lend lightly, and private companies to help us securely use our money for business and other financial services.

We pay taxes and fees to financial services companies (a multi-trillion dollar industry) for the privilege of this trust. This foundation of trust has been an important cornerstone of our economic progress over the past few centuries.

However, many financial systems do not deserve this level of trust. This is true even in some of the most prosperous and populous countries. For example, the great financial crisis in 2008-09 even caused the trust of the United States to be eroded. Global monetary stimulus by governments in response to COVID has reignited many doubts in recent years, further reducing trust.

It may not seem like a coincidence that the Bitcoin white paper that sparked the crypto industry was released on October 31, 2008, just six weeks after Lehman Brothers collapsed in the financial crisis. The white paper, titled "Bitcoin: A Peer to Peer Electronic Cash System," describes a solution to the Holy Grail problem in cryptography: using a distributed network to verify the authenticity of digital files.

This introduces a new kind of problem on the Internet:Verifiable scarcity and how to enable value to be transferred directly online without intermediaries.To exchange bitcoins, all we need is internet access and trust in bitcoin's open source code. Just as billions of people now believe that the Internet can enable the free exchange of global information, 220 million people now believe that the blockchain can realize the free exchange of global value.

From a historical background, “Internet finance” can be seen as a natural evolution of our financial system. The history of financial money is a story of gradual abstraction for convenience (barter economy to metal money to paper money, etc.).

Today, most of the money issued around the world is already digital, just like we used to replace gold with paper money. But we pay a huge price for the inefficiency of this analog system, with its fragmented jurisdictions, myriad intermediaries, and long settlement delays. Why don't we turn to the financial currency flow direction native to the Internet? Isn't this the next step in the journey that PayPal, Stripe, Square and others should start on?

While Bitcoin appears to be designed to solve the payment problem, in general, most inventions rarely go the way their inventors planned.As demand for Bitcoin grows, so do its price and transaction fees, making it increasingly useful as an investment vehicle (or store of value) rather than a payment mechanism (medium of exchange).

Most interestingly, new inventors built the concept of Bitcoin in new ways. For example, Ethereum contributed distributed ledgers not only for currency but also for computation.

As a decentralized computing platform, blockchain has captured the imagination of developers and has a great market prospect. It can be described macroscopically as an attempt to bring about a better financial order and a better Internet.

Better financial money: money free from arbitrary monetary policy, censorship and surveillance, and a more trustworthy, accessible, efficient and cheaper financial system;

A better internet: users own their data, not apps that rent access from a given platform; creators get better rewards, and the community governs itself; more fluid, portable across platforms, better for curating numbers Copyrighted Digital Goods (NFT).

These are just goals, we still have a long way to go. Some argue that the entire cryptocurrency endeavor is a scam, but that misses the point. Historically, when technological innovations lead to financial innovations before regulation, we see world-changing innovations, then manias, frauds, crashes, regulatory frameworks, and then a slow build of lasting value (see: 1600s Amsterdam early stock market).

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big change

Encryption technology will change the value of the Internet, and it will also change the value of the Internet itself. 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.

The inherent properties of the blockchain, instant value transfer, verifiable scarcity and user ownership, can restructure trillions of market caps in payments, finance, gaming, content, social networking, and more.

1. Digital currencies are fundamentally useful to 220 million people and many more in the future, whether as a capped-supply inflation hedge, censorship-resistant store of value, borderless medium of exchange and/or investment vehicle, creating a new asset class.

2. This new asset class is creating markets for both centralized and decentralized (DeFi) financial services. As with any asset class, owners want to be able to buy, hold, sell, trade, borrow, hedge, swap, subdivide, insure, and more. With cryptocurrencies, they also want 24/7 freedom across borders and time zones. This could potentially expand the current financial system and create more consumer choice.

3. The rise of encryption requires a new encryption stack. From core infrastructure to developer tools, some legacy stacks transform, others don't. Custody, nodes, fiat-to-crypto currencies, and on-chain and off-chain data are just a few areas of the emerging crypto stack. In this era, value may accumulate to new levels. In traditional software, the application layer generates more value (Google ~ 2T market cap, TCP/IP/SMTP is arguably $0), while in cryptocurrency, the core protocol can be monetized by tokens (BTC+ETH ~$2 T market value)

4. Blockchain supports not only digital assets, but also digital goods (NFT) and decentralized applications (Web3). While these areas are exploding in transaction volume, user interest, and developer energy, they are still in their early days. Web3 has enormous potential to use blockchain to reshape internet services around principles such as user ownership, creator rewards, and community governance (such as DAOs).

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Encrypted Mental Models

It may be helpful to understand cryptocurrencies along two dimensions:space and time。

Space: Below is a map of the crypto ecosystem.

It's organized like a typical stack, from hardware at the bottom to applications at the top, with the infrastructure that builds and accesses it on the right. For now, of course we know it's not perfect. Many of these categories overlap.

Timing: Inspired by the typical S-curve of new technology adoption, this is a framework for when an opportunity in a given area will mature. It's also not perfect -- construction happens simultaneously, phases overlap, and interact in feedback loops.

However, this is not a replay of every local maxima and minima of the past decade, rather, it is an attempt to narrow the field and imagine how we would evolve from millions to billions of crypto users.

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:Currency, foreign exchange, lending, derivatives, insurance, options, ETF, 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.secondary title。

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.

expect

Cryptocurrencies are still in their early stages. Although it is full of volatility, it is also full of innovation. To dismiss cryptocurrencies as pure speculation is to ignore that every financial innovation has a history of abusers, and to miss the enormous potential for creating a better financial system. Treating cryptocurrency as too slow, too expensive, or confusing to use is like denying the internet at the dial-up stage.

While the criticisms of crypto’s user experience, cost, speed, or environmental impact are valid, these are not doomsday signals for this movement, rather, these criticisms are opportunities for us to get in and build. Our basic demands are:Billions of people want a better financial system and a better internet; we think a new generation of developers is motivated to build for the world to meet these demands.