The exodus of partners and investors from venture capital firms into cryptocurrency investing has taken a new turn, as Sequoia Capital partner Matt Huang has become the latest finance industry heavyweight to make his exit. Wall Street Journal sources indicate that he is set to start a new cryptocurrency investment fund alongside Coinbase co-founder Fred Ehrsam.
This follows a familiar pattern of industry movements as the cryptocurrency investment scene becomes increasingly more attractive to traditional investment. Over the past twelve months, notable departures include Nick Tomaino of Runa Capital who left to start 1Confirmation, a cryptocurrency-focused fund which has received investment from billionaire Mark Cuban. Joel Monegro, an analyst with Union Square Ventures also quit to start his own fund called Placeholder.
The pattern of personal movements from VC firms to crypto funds come at a time when many VC firms are faced with a choice between making substantial investments in crypto or ignoring the crypto market as they have generally done previously. A number of partners at venture firms are of the opinion that now is the time to make crypto a central part of their investment strategy, so it would seem that these movements are a demonstration of their belief in the future of crypto investments.
At the same time, a number of VC firms have decided to keep hold of partners who are interested in crypto by creating special crypto funds that allow them to explore their passion without leaving the firm. An example of this is the Andreessen Horowitz crypto fund which is led by general partners Chris Dixon and Alex Rampell.
The Next Chapter
Following Mr. Huang’s expected June departure, Sequoia Capital will maintain its interests in the crypto space, including investments in Polychain Capital, Metastable, Filecoin and Orchid Labs. Confirming Huang’s departure, Partner Alfred Lin said that Mr. Huang “will remain a good friend of Sequoia, and we wish him great success.” Sources also indicated that the firm is planning to invest a substantial amount in the new fund.
Sequoia,is currently embroiled in a high-profile legal dispute with cryptocurrency exchange giant Binance, which the former accuses of violating an exclusivity agreement by engaging in discussions with other VC firms.
On his part, fund co-founder Fred Ehrsam stepped down from his role at Coinbase in 2017, but maintains a seat on the board of the startup which could be worth as much as $8 billion according to a reported internal valuation. After guiding Coinbase to become one of the largest cryptocurrency exchanges by volume in the US, he is expected to bring a high level of technical capacity to the fund’s investment strategy.
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