Sebastian Sinclair

Venture capital (VC) firms Sequoia and Multicoin Capital have issued letters to limited partners advising them of their exposure risk to collapsed crypto exchange FTX.



Multicoin Capital, a crypto-focused VC unit, has <a href="https://www.theblock.co/post/184766/multicoin-capital-hit-by-ftx-collapse-with-10-of-its-funds-aum-stuck-on-the-exchange" target="_blank" rel="noreferrer noopener">reportedly</a> told partners of its Master fund that it was unable to pull all of its crypto held on FTX before withdrawals were halted on Tuesday, saving just 24% of the funds held there.



FTX had witnessed an influx of $6 billion in withdrawals, triggering a bank run that followed revelations the firm was engaged in talks with Binance over a buyout deal. That deal has since <a href="https://cms.blockworks.co/1-binance-ftx-deal-is-off-unless-ftx-us-is-part-of-the-package-source/" target="_blank" rel="noreferrer noopener">soured</a>.



Roughly 10% of Multicoin’s total assets under management are still locked up on the exchange pending withdrawal approvals, the firm said. Those include bitcoin, ether and USD.



The process could take months to see through should FTX take the bankruptcy route, similar to what occurred at Celsius Network earlier this year. The bankrupt lender is yet to make its customers whole.



While its fund dodged the worst of Celsius, Voyager and Terra’s blowups, Multicoin said it couldn’t avoid being caught up in FTX’s insolvency due to its position in the exchange’s token FTT and other assets locked up on the platform. 



The firm also advised partners that the fund&#8217;s largest digital asset position is Solana’s native token (SOL). Previously championed by FTX CEO Sam Bankman-Fried, SOL has dipped more than 50% since Tuesday, from $29 to around $15, now <a href="https://cms.blockworks.co/news/shiba-inu-flips-solana-as-markets-play-bankman-fried-for-a-joke/" target="_blank" rel="noreferrer noopener">worth less than dog-themed memecoin</a> shiba inu.



As Binance CEO Changpeng Zhao began unwinding his exchange’s position in FTT, FTX’s sister company Alameda Research likely sold SOL to support FTT’s price, Multicoin said.&nbsp;



Multicoin said it was attempting to reduce unnecessary exposure by recalling all outstanding collateral, as well as eliminating contagion to another counterparty — crypto financial services firm Genesis. Further details on why Multicoin wanted to reduce its Genesis exposure were not provided.&nbsp;



Genesis meanwhile tweeted Thursday it had sold collateral resulting in a loss of roughly $7 million across all <a href="https://twitter.com/GenesisTrading/status/1590391027214725120?s=20&amp;t=WDWVimfGc6KV4T5UeC5NsA" target="_blank" rel="noreferrer noopener">counterparties</a>, including Alameda.



<h3 class="wp-block-heading">Sequoia Capital writes off crypto exchange FTX</h3>



Around the same time, Sequoia Capital issued a <a href="https://twitter.com/sequoia/status/1590522718650499073/photo/1" target="_blank" rel="noreferrer noopener">statement</a> of its own to its limited partners advising it would mark down its FTX investment to $0.



“In recent days, a liquidity crunch has created a solvency risk for FTX,” the Menlo Park firm said. “The full extent and risk is not known at this time.” Founded in 1972, Sequoia is one of Silicon Valley&#8217;s longest-running and most successful VC firms, having backed tech giants such as Apple and PayPal.



Sequoia, which has a stake in FTX and FTX.US via its Global Growth Fund III (GGFIII), said its exposure to the exchange was limited and that its $150 million stake accounted for less than 3% of the fund’s committed capital.



The distancing from FTX is part of a major shakeout in the industry which has rocked investors, spurred by public <a href="https://twitter.com/LucasNuzzi/status/1590122590206824448?s=20&amp;t=1ROZBsSFtb3lAWV99IQopA" target="_blank" rel="noreferrer noopener">speculation</a> over whether FTX <a href="https://twitter.com/AriDavidPaul/status/1590027413937090561?s=20&amp;t=L8h4QiopjfCJkEUoAerzLA" target="_blank" rel="noreferrer noopener">rehypothecated</a> client crypto to bail out Alameda in the second quarter of this year.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Here is the note we sent to our LPs in GGFIII regarding FTX. <a href="https://t.co/Cgp1Yxk1pz">pic.twitter.com/Cgp1Yxk1pz</a>&mdash; Sequoia Capital (@sequoia) <a href="https://twitter.com/sequoia/status/1590522718650499073?ref_src=twsrc%5Etfw">November 10, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



&#8220;At the time of our investment in FTX, we ran a rigorous diligence process,&#8221; said Sequoia in its letter. &#8220;In 2021, the year of our investment, FTX generated approximately $1 billion in revenue and more than $250 million in operating income, as made public in August 2022.&#8221;



GGFIII, which targets software and tech companies, consists of $7.5 billion in realized and unrealized gains with a $1.7 billion and $5.8 billion split respectively, Sequoia said. 



Sequoia&#8217;s total assets under management was <a href="https://www.theinformation.com/articles/sequoia-capital-to-open-new-york-office-first-u-s-outpost-outside-silicon-valley" target="_blank" rel="noreferrer noopener">around</a> $85 billion earlier this year.



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Crypto VCs Reckon With Failing FTX Investments

Morgan Chittum

<div id="highlights-block_622f6a34c8037" class="highlights">
 <ul>
 <li>The capital will go toward staff expansion, product development and future partnerships</li>
 <li>Other investors include Sequoia Capital, Electric Capital, Greylock Partners, Kindred Capital, Variant Fund and Solana Ventures</li>
 </ul>
 
</div>



Magic Eden, a Solana-based NFT marketplace, announced a $27 million Series A funding round on Monday. The round was led by Paradigm with participation from Sequoia Capital, Electric Capital, Greylock Partners, Kindred Capital, Variant Fund and Solana Ventures.



The raise will go toward staff expansion, future partnerships and product development.



Jack Lu, CEO and co-founder of Magic Eden, told Blockworks that the funding will “help [them] expand as a company, including hiring the best talent, improving [their] product and infrastructure and investing in community initiatives.”



Among those initiatives is MagicDAO, a recent attempt to launch a decentralized autonomous organization (<a href="https://cms.blockworks.co/the-investors-guide-to-daos/" target="_blank" rel="noreferrer noopener">DAO</a>) gated by the startup’s NFT (non-fungible token) collection Magic Ticket. The project airdropped 30,602 such tickets, which provide access to the group&#8217;s Discord channels, to community members and plans to involve those members in governance decisions in the future.



Magic Eden has recorded over $736 million in total trading volume since its launch last year — establishing itself as the largest Solana marketplace, according to data dashboard <a href="https://dappradar.com/nft/marketplaces/protocol/solana" target="_blank" rel="noreferrer noopener">DappRadar</a>.



Trading volumes for Magic Eden, however, have declined 85.76% to roughly $41 million in the past month — mirroring the performance of the broader NFT market.



The NFT marketplace OpenSea&#8217;s trading and transaction volumes fell as well, declining <a href="https://dappradar.com/nft" target="_blank" rel="noreferrer noopener">22.4%</a> and <a href="https://dappradar.com/nft" target="_blank" rel="noreferrer noopener">11.61%</a> respectively over the past month. OpenSea, unlike Magic Eden, auctions off NFTs on Ethereum and Polygon.



Paradigm, which launched <a href="https://cms.blockworks.co/paradigm-launches-2-5-billion-crypto-fund/" target="_blank" rel="noreferrer noopener">a $2.5 billion crypto fund</a> last November, is an investor in OpenSea as well.Benjamin Cohen, managing partner of crypto fund Web 3 Equities, previously <a href="https://cms.blockworks.co/crypto-portfolio-managers-collectors-say-nft-market-bound-for-correction/" target="_blank" rel="noreferrer noopener">told</a> Blockworks when a market is as fast as OpenSea, it is “fair to assume that [it] will experience large swings and corrections.”



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NFT Marketplace Magic Eden Secures $27M Series A

Jacquelyn Melinek

<div id="highlights-block_620fa964ea3d9" class="highlights">
 <ul>
 <li>On Friday, Ethereum-focused multichain network SKALE set up a $100 million grant program to fund the future of blockchain-based gaming</li>
 <li>Large funds announced this week include a $205 million ecosystem fund for The Graph and Sequoia Capital’s new crypto sub-fund for up to $600 million</li>
 </ul>
 
</div>



This week was busy, yet again, for the crypto funding space as a number of multi-million-dollar investments and mega funds were shared with the public.



On Friday, Ethereum-focused multichain network SKALE set up a <a href="https://cms.blockworks.co/ethereum-multi-chain-network-earmarks-100m-to-fuel-blockchain-gaming/" target="_blank" rel="noreferrer noopener">$100 million grant program</a> to fund the future of blockchain-based gaming. This launch is the latest step for the blockchain gaming space, which has grown exponentially over the past 12 months and is drawing attention from big investors and funds.



Meanwhile, Binance Labs, the venture capital arm of Binance, completed a strategic investment in a multichain liquidity protocol, Symbiosis Finance.



The funding will be used to support the company through its Mainnet launch and add support for more Ethereum virtual machine (EVM) and non-EVM networks, as well as integration with different wallets, services and dApps.



“The idea is simple; we strive to learn from the market leaders, adopt their best practices and this is the way we can create something in demand,” Nick Avramov, co-founder and chief marketing officer at Symbiosis Finance, said in a <a href="https://www.binance.com/en/blog/ecosystem/binance-labs-makes-strategic-investment-in-symbiosis-finance-421499824684903475" target="_blank" rel="noreferrer noopener">post</a>.



Significant new funds entered the space, including a <a href="https://cms.blockworks.co/investors-bolster-the-graph-with-205m-ecosystem-fund/" target="_blank" rel="noreferrer noopener">$205 million ecosystem fund</a> by six investors to help invest in projects building on The Graph protocol, an indexing layer for Web3 and blockchain data.



Sequoia Capital is also launching a new <a href="https://cms.blockworks.co/sequoia-capital-is-raising-up-to-600m-in-new-sub-fund-to-focus-on-tokens/" target="_blank" rel="noreferrer noopener">$500 million to $600 million</a> sub-fund, focusing primarily on liquid tokens and digital assets, a spokesperson confirmed with Blockworks on Thursday.



On a smaller scale, an alternative investment platform, Yieldstreet, announced its <a href="https://www.yieldstreet.com/offering/EaLf3g/pantera-early-stage-token-fund-i/" target="_blank" rel="noreferrer noopener">first crypto fund</a> through a partnership with Pantera Capital. The firm expects to raise about $20 million for the fund with minimum investments of $25,000, a spokesperson told Blockworks.



From Protocol Labs, the open-source decentralized storage network Filecoin and IPFS launched a $38 million fund focused on improving the internet and renewable energy throughout the US with Nelnet Renewable Energy Services.



The strategic investment will finance solar energy projects and aims to contribute more energy to the grid than is consumed by Filecoin’s network. Thus, enabling the “responsible growth” of Filecoin without taking from the domestic power grid, it said.&nbsp;



“Protocol Labs is committed to driving the next generation of the internet, Web3, toward net-zero emissions,” Head of Filecoin Green at Protocol Labs Alan Ransil said in a statement. “By investing in solar development with Nelnet, we are both building new generation capacity in this vital public infrastructure system and helping to push the renewable energy transition forward.”



Other notable capital raises this week include:&nbsp;



<ul class="wp-block-list"><li>Animoca Brands and Brinc partnered to launch a <a href="https://cms.blockworks.co/animoca-brands-and-brinc-to-invest-up-to-30m-in-play-to-earn-ecosystem/" target="_blank" rel="noreferrer noopener">$30 million</a> guild accelerator program to grow the play-to-earn ecosystem</li><li>Crypto wallet Rainbow’s <a href="https://techcrunch.com/2022/02/15/web3-mobile-wallet-startup-rainbow-raises-18m-series-a-from-alexis-ohanians-fund/" target="_blank" rel="noreferrer noopener">$18 million Series A</a> led by Alexis Ohanian’s venture firm, Seven Seven Six</li><li>Fluence Labs <a href="https://twitter.com/fluence_project/status/1494423913471766533?s=20&amp;t=50dLcJ5qL4491Mjga3FhuA" target="_blank" rel="noreferrer noopener">$9 million</a> round led by MultiCoin Capital</li><li>DeFi lending protocol Minterest’s <a href="https://www.prnewswire.com/news-releases/defi-lending-protocol-minterest-closes-successful-5-52m-sale-of-mnt-token-301481699.html" target="_blank" rel="noreferrer noopener">$5.52 million</a> token sale</li><li>An open marketplace for Solana NFTs, Hyperspace’s $4.5 million seed round led by Dragonfly Capital and Pantera Capital</li><li>Solana-powered metaverse game MixMob’s <a href="https://smartliquidity.info/2022/02/18/mixmob-raises-7-million-in-latest-seed-funding-round/" target="_blank" rel="noreferrer noopener">$7 million</a> raise</li></ul>



Check back next week for more funding news.



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Funding Roundup: Capital and Funds Continue To Launch Into Crypto

<div id="highlights-block_620e829c7741a" class="highlights">
 <ul>
 <li>The fifty-year-old company has $80 billion in assets under management</li>
 <li>The firm&#8217;s involvement in crypto started back in 2015 when it began investing in the space through both equity and tokens</li>
 </ul>
 
</div>



Sequoia Capital is launching a new $500 million to $600 million sub-fund focused primarily on liquid tokens and digital assets, a spokesperson confirmed with Blockworks on Thursday.



The capital plans to complement its other crypto investments in seed, venture, growth and expansion funds. It is also one of the first sub-funds to be launched as part of its new Sequoia Capital Fund, an open-ended liquid portfolio, the company said.



The founders have asked the firm to take a more active role in managing its tokens through staking, providing liquidity, participating in governance and trading through portfolio companies’ platforms. This fund will give it the ability to engage further, the company shared.



“Our goal with this fund is to participate more actively in protocols, better support token-only projects, and learn by doing ourselves,” Sequoia Capital’s Michelle Bailhe, Shaun Maguire and Alfred Lin wrote on the Sequoia <a href="https://sequoia.medium.com/a-block-step-forward-14274f4a0e65" target="_blank" rel="noreferrer noopener">blog</a>.



The firm&#8217;s involvement in crypto started back in 2015 when it began investing in the space through both equity and tokens. In 2017, Sequoia invested through its main funds, while in 2021, 20% of its new investments throughout the US and Europe were in crypto.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We believe that crypto is more than a sector; it’s a fundamental shift that will impact all sectors,” Sequoia noted.&nbsp;</blockquote>



In general, Sequoia Capital invests in a number of sectors aside from crypto, such as technology, financial services, energy and healthcare. The fifty-year-old company has $80 billion in assets under management, according to PitchBook data.



This scale of investment is not uncommon for the firm. Sequoia Capital’s India branch <a href="https://cms.blockworks.co/polygon-closes-450m-raise-led-by-sequoia-india/" target="_blank" rel="noreferrer noopener">led a $450 million</a> private token sale in <a href="https://cms.blockworks.co/?s=polygon" target="_blank" rel="noreferrer noopener">Polygon</a> — a decentralized Ethereum scaling platform — earlier this month. Separately, in January, Sequoia and Paradigm invested <a href="https://cms.blockworks.co/sequoia-and-paradigm-invest-1-15b-in-citadel-securities/" target="_blank" rel="noreferrer noopener">$1.15 billion</a> in Citadel Securities.



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