capital of the sequoiasa historic venture capital firm, announced today which has launched a dedicated seed fund of $195 million, its fifth. The vehicle will be used to support founders in the United States and Europe; the capital will also be used to invest in future cohorts or their Arc program, an internal Sequoia initiative that invests between $500,000 and $1 million in rising founders around the world and is currently accepting requests.
The capital comes as the world of seeds and seeds, already a growing part of the startup ecosystem, becomes even more attractive to investors who want to steer clear of later-stage market turmoil. AngelList data, released today, tells part of the story, noting that median pre-seed valuations held steady quarter-over-quarter last year, while later-stage deals like Series B fell by nearly a third.
Jess Lee, a partner at Sequoia and co-founder of All Raise, said On twitter that the firm will search all verticals for potential outlier founders, but specifically mentioned artificial intelligence and consumer social media as two areas in which it is investing.
in a blog post In announcing the seed fund, other partners also hinted at areas of interest. Alfred Lin noted that augmented reality and virtual reality are the components of the “next consumer platform to drive innovation at scale.” Shaun Maguire said that “hardware will always have my heart”. Roelof Botha, the recently appointed global head of SequoiaHe kept it simple, writing in the post that he’s looking for founders who are taking advantage of a more disciplined market and the falling cost of automation, artificial intelligence, and even genetic sequencing.
In an email exchange this morning, Sequoia partner Stephanie Zhan said, “It’s never too early to partner with Sequoia. We want to meet the founders right at the beginning of their thought process” and “play an active role early on: developing ideas, asking questions for thought food, introducing them to potential clients, and dreaming together about their vision.”
Zhan noted that Sequoia has written seed checks on a number of once-fledgling startups that have grown into major brands, including Airbnb (Sequoia initially invested about $600,000 in the company); Dropbox (raised about $950,000 early on) and Nubank ($1 million).
Zhan noted that Sequoia also partnered with still-private payments giant Stripe “back when they didn’t have a single line of code”; he was the first investor in WhatsApp; and Palo Alto Networks and YouTube were incubated in his offices.
Sequoia, like many companies, has seen its portfolio humbled during the recession, which may affect how partners handle due diligence and sourcing in the coming year. Last week, the Sequoia-backed company GoMechanic cut 70% of jobsand its founder admitted in a LinkedIn post that the team made “serious errors in judgment as we followed growth at all costs.”
Other Sequoia portfolio companies with significant cuts include Bounce, Ola and FTX. Indeed, Sequoia’s $200 million investment in FTX has drawn fair criticism of the company’s record of decision-making.
Lin, who was interviewed by TechCrunch’s Connie Loizos last week at her StrictlyVC event, said the experience has not soured Sequoia’s interest in cryptocurrencies. Although she said that only 10% of Sequoia’s crypto fund has been implemented a year after its launch, she added that Sequoia remains “long-term bullish” on cryptocurrencies.
Lin also told Loizos that “the not-so-fun years are the best times to invest, because all the tourists are gone,” a sentiment echoed today by Zhan in his exchange with TC.
Zhan wrote: “The end of the sparkling market in recent years is positive. Limitations generate creativity and discipline. Many of today’s most transformative companies were founded during periods of uncertainty, and we believe the same is true now.”