We’re starting to see where all that dry powder is going.
After a relatively quiet year on the private markets, venture firms are getting back into the funding game. Sequoia, a long-standing venture capital firm, announced a new $195 million fund for seed-stage startups, according to Forbes.
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This isn’t a bad strategy for the prolific venture firm, which was an early investor in Apple, Stripe and Instagram. The funding market is currently at a standstill as startups, in an urge to preserve their current sky-high valuations, are reluctant to raise down-rounds. Since investors aren’t willing to shell out funding at current value, funding news has been relatively quiet compared to the heyday of 2021.
But investing in seed-stage startups gives venture firms like Sequoia a chance to invest at market rate, without the baggage that has plagued the private market in 2022.
This new fund is a chance for Sequoia to dip its toes back into the funding stream, after a rough 2022. The firm had to send an apology letter to investors for its FTX crypto investment (which ended up filing for bankruptcy in November). Sequoia, which holds stock in many of its now-public investments, also saw stock prices tumble: Snowflake is sharing 41% lower than when it debuted, while DoorDash is sharing 71% lower than its debut stock price.
Some of that $195 million will be funneled into Arc, Sequoia’s seven-week long accelerator program that teaches first-time founders how to build a company. Arc started in 2022 with two batches, but in 2023 the firm plans to run three cycles and give each seed-stage company no more than $1 million to participate.
Firms like Sequoia are entering 2023 with around $1.3 trillion in dry powder, but without anywhere to go in a precipitous financial market. It’ll be interesting to see new solutions VCs build to remain active.
Illustration: Dom Guzman
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