As crypto’s rapid growth continues, historic venture company Sequoia is fighting not just with the a16z’s of the world, but also with a growing crop of crypto native venture funds, whose assets are ballooning and whose influence is upending traditional venture hierarchies. Sequoia crypto partner Shaun Maguire spoke with TechCrunch’s new web3 podcast Chain Reaction on the firm’s commitment to the industry, regulatory obstacles, and what many crypto investors still don’t grasp.
Sequoia Capital established a $500 million to $600 million cryptocurrency-only sub-fund earlier this year. While Andreessen Horowitz was the first to commit to a separate crypto fund in 2018, Sequoia has continued to make equity investments in crypto firms through its regular funds. While the crypto sector continues to create new unicorn companies, the quick cooling of public market tech equities has threatened to halt development in the fledgling category, which has proved to be extremely vulnerable to macroeconomic factors.
During our chat, Maguire reiterated his conviction that many other funds dabbling in crypto will “draw back” when the market becomes less bubbly, but that Sequoia has already committed to a long-term relationship with the industry — “we have permanent objectives.” “Everything we do at Sequoia is very deliberate, and we spend a lot of time debating every strategy change, everything,” Maguire explains. “We debate every seed investment to sometimes excruciating detail, but it helps us make really good decisions and make them as a team rather than as individuals.”
“When we make a choice to do anything, we don’t execute it unless the entire team is on board.” So that’s what you’ve seen with cryptocurrency over the last 18 months: we’ve gone from a few individuals with extremely strong favorable opinions to the entire business being absolutely behind it.” Many doubters, including those in the venture capital industry, feel that the sector’s benefits are being overstated and that the web3 promise of decentralization is nothing more than smoke and mirrors.
“I am an absolute crypto maniac,” Maguire stated, “but I believe there are a lot of things that the general public misunderstands now.” “Decentralization isn’t a panacea that cures all issues and makes everything great. You already know that you want the vast bulk of computation to be centralized. For certain sorts of decisions, centralization may be preferable to decentralization.” More crucial than decentralization for the sake of decentralization, according to Maguire, is users’ ability to “leave with their identity and data,” an endeavor that should shield customers from platform overreach.
While decentralization provides for certain consumer safeguards, Maguire believes that the old investor protections framework should not be abandoned. “One of the conflicts I have in my brain is that I believe people often forget that many of the consumer safeguards enacted by US law were achieved over the course of a century of hard-won lessons.” Maguire adds, “And there’s a lot of wisdom in there.”
“One way to look at what’s going on in crypto right now is that it’s almost like tossing out all the previous rules and starting again.” ‘Oh, actually, the way things were done in the past was actually pretty good and got there for an optimal reason,’ I think what we’re seeing is a lot of the crypto community coming back in 90% of the situations and realizing,’Oh, actually, the way things were done in the past was actually pretty good and got there for an optimal reason,’ I think what we’re seeing is a lot of the crypto community coming back in 90% of the situations and realizing,’ But 10% is a huge difference, and getting some of those things right may have a significant impact on the entire system.”
