Sequoia tells partners the firm marked down its FTX investment of $213.5M across two funds to $0, saying it “ran a rigorous diligence process” before investing
- Its $150 million of exposure to both FTX and FTX.US in its third global growth fund represents less than 3% of that fund's total capital commitment.
Context & Ripple Effects
The write-down lands a week into FTX's collapse: SBF had been scrambling through a $7B+ emergency raise that included Sequoia just days earlier, and Reuters has since detailed how FTX and Alameda showed investors some of the same assets on both books despite claiming separate operations. Sequoia's move is damage containment — capping the loss at $213.5M across two funds, with the $150M growth-fund exposure under 3% of that vehicle's capital.
The firm is simultaneously defending its process ('rigorous diligence') and bracing for the LP reckoning that follows any headline blowup at a firm of its stature.
First-order effects
- Limited partners in the two affected funds absorb the full $213.5M loss on paper, with the third global growth fund taking $150M of it — a sub-3% hit to that vehicle but a reputational one for the franchise.
- Sequoia's public 'rigorous diligence' defense pre-positions the firm against claims it skipped basic checks before wiring into an exchange whose internal accounting software hid FTX-Alameda transfers.
Second-order effects
- LP pressure forces a formal response: within two weeks Sequoia apologizes to its fund investors and commits to a reworked due-diligence process for new investments.
- The blowup accelerates Sequoia's retreat from the asset class — by mid-2023 it cuts its crypto fund from $585M to $200M and halves its ecosystem fund, shrinking capital committed to the sector that produced the loss.
Third-order effects
- For top-tier firms, the episode makes diligence credibility a balance-sheet asset: one sub-3% position can trigger LP apologies, process overhauls, and strategy cuts disproportionate to the dollar loss.
- Sequoia's broader machine keeps compounding anyway — its evergreen fund grows from $13.6B to $19.6B by early 2025 — suggesting single-bet failures get absorbed structurally rather than reshaping how mega-firms deploy capital.
The trend: Mega-VC firms are learning to quarantine concentrated blowups like FTX — absorbing the write-down, appeasing LPs with process fixes, and retrenching from the sector — without slowing overall fund growth.