At an industry event in San Francisco hosted by this publisher last night, Sequoia Capital venture capitalist Alfred Lin sat down for a fireside chat about the evolution of his storied investment firm, which has enjoyed a track record in largely unimpeachable measure of surprising success: a record since it was marred by his roughly $200 million investment in cryptocurrency exchange FTX.
The investment, once a source of pride for the company, has not tarnished Sequoia but also Lin, who led the deal on Sequoia’s behalf, was the company’s point of contact with CEO Sam Bankman-Fried during a year and a half. and who spoke thoughtfully yesterday about how he feels today about a bet gone so wrong.
When asked, for example, if looking back, there were signs that Lin sees now that she was lost before, she replied after a pause: “I thought [Bankman-Fried] it was very smart. . He answers the questions very logically and succinctly. Could we have seen any indicators? I dont know. There is what I know today and what I knew at the time. If I had known at the time, we would not have invested. So today, I think what makes me reevaluate is. . . It’s not that we made the investment. It’s the working relationship of a year and a half later, and I still haven’t seen it. And that’s hard.”
If it was particularly challenging for Lin given that only a year before, he topped off Forbes Midas Annual List, he did not say. But he suggested that the experience remains unsettling for him because Bankman-Fried seemed to tap into what the venture industry considers one of its greatest strengths.
Lin explained that it is “a trust business. And yes, we need to trust and verify, and we try to verify what we can. But we start from a position of trust, because if we don’t trust the founders we work with, why would you invest in them?
Image Credits: Dani Padgett (opens in a new window)
Lin had a lot more to say about FTX, even if he does have some sympathy for Bankman-Fried. He defended Sequoia’s decision to manage his positions in its portfolio companies well beyond the point at which they go public.
Lin also confirmed during the event that, in a gesture to its limited partners, Sequoia last year lowered its management fees on two funds it launched a year ago: a $950 million ecosystem fund that it uses to support the funds of other administrators and a pool of $600 million crypto funds. Lin said that instead of charging his backers for the committed capital, which is standard in the industry, he is charging them administration fees only for their committed capital. (On that front, he said only 10% of the crypto fund has been deployed, adding that Sequoia remains “long-term bullish” on crypto.)
Lastly, Lin shared his views on how generative AI, one of the most controversial areas of interest for the venture industry right now, is changing the opportunity for both venture capitalists and investors.
Below is the full video of the conversation.
