As crypto continues its wild rise, storied venture firm Sequoia is not just competing with the a16z's of the world but with a rising crop of crypto native venture funds that are seeing their assets balloon and their influence upend the traditional venture hierarchies. In a conversation on TechCrunch's new web3 podcast Chain Reaction, Sequoia crypto partner Shaun Maguire talked about the firm's commitment to the sector, regulatory challenges and what plenty of crypto investors still don't understand.
Earlier this year, Sequoia announced a $500 to $600 million sub-fund dedicated exclusively to buying up cryptocurrencies. The firm has made a number of equity investments in crypto startups over the years including Fireblocks and FTX, but while Andreessen Horowitz was early to commit to a dedicated crypto fund in 2018, Sequoia has continued made its equity investments through its general funds.
While the crypto industry continues to mint new unicorn startups, the rapid cooling of public market tech stocks has threatened to stall growth in the emerging category, which has still proven awfully susceptible to macro conditions. In our conversation, Maguire emphasized his belief that plenty of other funds dipping their toes into crypto "are going to pull back" when the market grows less frothy, but he believes that Sequoia has already committed to a lengthy relationship with the sector -- "we have permanent intentions."
"Sequoia is very deliberate with everything we do and we spend huge amounts of time debating every strategy change, everything, we debate every seed investment to sometimes excruciating detail, but it helps us make really good decisions and make decisions as a team rather than as individuals," Maguire tells us. "When we make a decision to do something, it doesn't happen unless the whole team is behind the decision. So that's what you've seen get unleashed with crypto over the last 18 months, we went from it being some people with really, strong positive views, to the whole firm being completely behind it."
The crypto category has dealt with plenty of skeptics, some in the venture capital community, who believe that the sector's benefits are being oversold and that the web3 promise of decentralization is just smoke and mirrors.
"I am an absolute crypto maxi, but I think there are a lot of things that are misunderstood by the masses today," Maguire said. "Decentralization is not a silver bullet that just solves all problems and is better for everything. You know for the vast majority of compute, you want it to be centralized. For a lot of decision making, centralization can be better for certain types of decisions."
Maguire said that more important than decentralization for its own sake, is the ability of users to "be able to leave with their identity and data," an effort which should protect consumers from platform overreach. While decentralization allows for a certain type of consumer protections, Maguire still contends that the rulebook of traditional investor protections shouldn't be thrown out.
"One of the tensions I have in my head is that I think people sometimes forget that a lot of the consumer protections put in place by US law were won out of hard-fought lessons over like a century. And there's a lot of wisdom in there," Maguire says. "In some ways, one way to view what's happening in crypto right now is it's almost like throwing all the old rules out and starting with a blank canvas.. I think what we're seeing is a lot of the crypto community is actually coming back in 90% of the situations and realizing that, 'Oh, actually, the way things were done in the past was actually pretty good and got there for an optimal reason,' But 10% is like radically different and... you can kind of meaningfully improve the whole system by getting some of those things right."
You can listen to the entire interview with Maguire on our podcast, Chain Reaction. Subscribe to Chain Reaction on Apple, Spotify or your alternative podcast platform of choice to keep up with us every week.