VC firm Sequoia Capital’s Doug Leone on the fallout from FTX collapse

HELSINKI, Finland — Billionaire enterprise capitalist Doug Leone stated there wasn’t a lot his agency Sequoia Capital may do to foretell the solvency disaster at FTX.

Leone was requested by fellow Sequoia companion Luciana Lixandru onstage on the Slush startup convention in Helsinki: “Sequoia has been within the press rather a lot for the previous couple of weeks — what ought to now we have carried out in a different way?”

With out mentioning FTX by identify — although strongly hinting at it (“I am not going to say any acronyms”) — Leone stated Sequoia had carried out “cautious due diligence” on FTX.

Sequoia, which invested $210 million in FTX, wrote down the worth of its stake within the crypto alternate to zero final week after rival alternate Binance’s withdrawal of a proposal to rescue the corporate left it dealing with chapter.

FTX founder Sam Bankman-Fried stepped down because the agency’s CEO final Friday as the corporate filed for Chapter 11 chapter safety. FTX, as soon as valued at $32 billion, collapsed in a matter of days amid a liquidity crunch and allegations that it was misusing buyer funds. The Securities and Trade Fee and the Division of Justice are reportedly investigating what occurred.

“What you see on the finish of the quarter is a due diligence assertion [which] would not replicate what somebody could have carried out within the center earlier than,” Leone instructed an viewers of entrepreneurs and buyers in Helsinki.

“We have checked out it,” he stated, including: “There’s nothing a lot we may have carried out any in a different way.”

Sequoia was one in every of quite a few blue-chip funds that backed FTX earlier than its demise. Different backers included SoftBank, Tiger World and the Ontario Academics’ Pension Plan.

In an article on Sequoia’s web site, Bankman-Fried was praised as a “genius” who would go on to create the “dominant all-in-one monetary super-app of the long run.” In that very same piece, which has since been deleted, it’s revealed the FTX chief was enjoying the online game League of Legends whereas on a Zoom assembly with Sequoia’s companions.

Bankman-Fried was changed as CEO by John Ray III, who previously oversaw Enron’s chapter. On Thursday, Ray stated in a submitting with the U.S. Delaware district chapter court docket that, in his 40 years of authorized and restructuring expertise, he had by no means seen “such an entire failure of company controls and such an entire absence of reliable monetary data.”

Leone hinted that FTX’s implosion could have an effect on Sequoia’s investing ideas within the close to time period. Sequoia is “in a dream enterprise” with entrepreneurs, Leone stated. “I can inform you that, for the subsequent three to 6 months, we’ll dream rather less,” he added.

Nevertheless, the enterprise capital investor added: “Like having a baby, you neglect the ache of getting that youngster three months later, a yr later. We wish to be in a dream enterprise.”

“We don’t wish to lose … our true perception to align ourselves with you and to dream with you — I feel we lose that and we’re out of enterprise,” Leone stated.

Leone joined Sequoia in 1996 and, up till earlier this yr, led the agency’s world operations. He was changed as Sequoia’s “senior steward” in July by Roelof Botha, one other high government on the agency.