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Sequoia Capital simply marked all the way down to zero the worth of its stake within the cryptocurrency trade FTX — a stake that, as of final week, probably represented among the many most sizable unrealized positive factors within the enterprise agency’s 50-year historical past.
This story is creating: right here is the letter it simply despatched out to its restricted companions.
Pricey Restricted Accomplice,
We’re reaching out to share an replace on our funding in FTX. In current days, a liquidity crunch has created solvency danger for FTX. The complete nature and extent of this danger isn’t identified at the moment. Based mostly on our present understanding, we’re marking our funding all the way down to $0.
Sequoia Capital’s publicity to FTX is restricted. We personal FTX.com and FTX US in a single non-public fund, International Progress Fund III. FTX isn’t a prime ten place within the fund, and our $150 million price foundation accounts for lower than 3% of the dedicated capital of the fund. The $150 million loss is offset by ~$7.5B in realized and unrealized positive factors in the identical fund, so the fund stays in good condition.
Individually, SCGE Fund, L.P. invested $63.5M in FTX.com and FTX US, representing lower than 1% of the SCGE Fund’s 9/30/2022 portfolio (at honest worth).
We’re within the enterprise of taking danger. Some investments will shock to the upside, and a few will shock to the draw back. We don’t take this duty frivolously and do intensive analysis and thorough diligence on each funding we make. On the time of our funding in FTX, we ran a rigorous diligence course of. In 2021, the 12 months of our funding, FTX generated roughly $1B in income and greater than $250M in working revenue, as was made public in August 2022.
The present state of affairs is creating rapidly. We are going to talk in a well timed method when extra data is obtainable. You probably have any extra questions, please contact Andrew Reynolds, Marie Klemchuk and Kathleen Forte at: [email protected]. For SCGE questions, please contact Kimberly Summe at [email protected].
Sincerely.
Workforce Sequoia
Footnotes:
International Progress Fund III (GGFIlI) knowledge is as of September 30, 2022 and is predicated on U.S. GAAP. The $7.5B consists of $5.8B of unrealized acquire and $1.7B of realized acquire. which incorporates the Common Accomplice distribution on Might 27, 2021 pursuant to the 2021 Modification. Previous efficiency isn’t indicative of future outcomes
International Progress Fund III (GGFIII) refers to Sequoia Capital International Progress Fund III – Endurance Companions, L.P. and doesn’t embody Sequoia Capital International Progress Fund III – U.S./India Annex Fund, L.P., Sequoia Capital International
Progress Fund III – China Annex Fund, L.P., and their parallel funds
Extra on this story shortly . . .
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