Sequoia Capital, a storied venture capital firm, announced today that it has launched a $195 million dedicated seed fund, its fifth. The vehicle will be used to support founders across the United States and Europe; the capital will also be used to invest in future cohorts or its Arc program, an internal Sequoia initiative that invests between $500,000 and $1 million in rising founders around the world and is currently accepting applications.
The capital comes as the pre-seed and seed world, already a growing part of the startup ecosystem, becomes even more attractive to investors who want to avoid the market turmoil of -later stage. AngelList data, released today, tells part of the story, noting that median pre-seed valuations held last year’s quarter consistently, while later-stage deals , like Series B, decreased by almost a third.
Jess Lee, partner at Sequoia and co-founder of All Raise, said on Twitter that the firm will be looking at all verticals for potential outlier founders, but specifically called out artificial intelligence and the social consumer as two areas in which it is investing.
In a blog post announcing the seed fund, other partners similarly hinted at areas of interest. Alfred Lin pointed to augmented reality and virtual reality as the shape of the “next consumer platform to drive large-scale innovation.” Shaun Maguire said that “hardware will always have my heart.” Roelof Botha, the recently appointed global head of Sequoia, kept it simple, writing in the post that he is looking for founders who are taking advantage of a more disciplined market, and the falling cost of automation, the artificial intelligence, and even genetic sequencing.
In an email exchange this morning, Sequoia partner Stephanie Zhan said that “it’s never too early to join Sequoia. We want to meet the founders right at the beginning of their thinking process” and to “play an active role from the beginning: we move ideas, pose questions as food for thought, introduce them to potential clients, and dream together about the vision their.”
Zhan noted that Sequoia has written seed checks in a number of fledgling startups that have developed into major brands, including Airbnb (Sequoia initially invested about $600,000 in the company); Dropbox (which brought in about $950,000 early) and Nubank ($1 million).
Zhan observed that Sequoia also partnered with the still-private payments giant Stripe “when they didn’t have a single line of code”; was the first investor in Whatsapp; and Palo Alto Networks and YouTube were incubated in its offices.
Sequoia, like many firms, has seen its portfolio humble during the downturn, which may impact how partners are managing due diligence and sourcing in the coming year. Just this past week, Sequoia-backed company GoMechanic cut 70% of its jobs, with its founder admitting in a LinkedIn post that the outfit made “serious errors in judgment as we pursued growth at of everything.”
Other Sequoia portfolio companies with sizable stakes include Bounce, Ola, and well, FTX. Indeed, Sequoia’s $200 million investment in FTX has drawn fair criticism of the firm’s decision-making record.
Lin, who TechCrunch’s Connie Loizos interviewed last week at her StrictlyVC event, said the experience didn’t dampen Sequoia’s interest in crypto. Although he said that only 10% of Sequoia’s crypto fund was deployed a year after it was launched, he added that Sequoia remains “long-term optimism” about crypto.
Lin also told Loizos that “not so fun years are the best times to invest, because all the tourists are gone,” a sentiment that Zhan reiterated today in her exchange with TC.
Zhan wrote: “The end of the foam market of recent years is positive. Constraints foster creativity and discipline. Many of today’s most transformative companies were founded during periods of uncertainty, and we believe the same is true now.”