Last night, at an industry event hosted by this editor in San Francisco, venture capitalist Alfred Lin of Sequoia Capital sat down for a fireside chat about the evolution of his storied investment firm, which has enjoyed a largely unblemished record of stunning success. – a record since marred by its approximately $200 million investment in the crypto currency exchange FTX.
The investment, once a source of pride for the company, not only tarnished Sequoia, but also Lin, who led the deal on Sequoia’s behalf and also served as the company’s point of contact with CEO Sam Bankman-Fried for a year and a half. . He spoke pensively yesterday about how he feels today about a bet gone so wrong.
Asked, for example, if, looking back, there were any signs that Lin sees now that he missed before, he replied after a pause, “I thought [Bankman-Fried] was very smart. . . He answers questions very logically and very concisely. Would we have seen anything? I do not know. There is what I know today and what I knew then. If I had known at the time, we would not have invested. So today I think the thing that leads me to review again is. . . it’s not that we made the investment. It’s the working relationship a year and a half after that, and I still didn’t see it. And that is difficult.”
If it was particularly challenging for Lin, given that just a year earlier, he refilled Forbes’ annual Midas list, he didn’t say it. But he suggested the experience still troubles him, as Bankman-Fried appeared to be capitalizing on what the venture industry considers one of its greatest strengths.
Lin explained, it is “a trust company. And yes, we need to trust and verify, and we try to verify what we can. But we assume a position of trust, because if we don’t trust the founders we work with, why would you ever invest in them?”
Image Credits: Danny Padgett
Lin had a lot more to say about FTX, including whether he has any sympathy for Bankman-Fried. He defended Sequoia’s decision to manage its holdings in its portfolio companies well past the point of going public.
Lin also confirmed at the event that last year, as a gesture to its silent partners, Sequoia reduced its management fees for two funds it rolled out a year ago — a $950 million ecosystem fund it uses to support other managers’ funds and a $600 million million crypto fund. Lin said that instead of charging its lenders committed capital, which is industry standard, it only charges them management fees on invested capital. (On that note, he said only 10% of the crypto fund has been deployed, adding that Sequoia remains “long-term bullish” on crypto.)
Finally, Lin shared his thoughts on how generative AI – currently one of the hottest areas of interest for the venture industry – is changing opportunities for both VCs and investors.
Full video of the conversation follows.
