Sequoia Capital partner talks new crypto fund, Biden’s executive order, and uses for digital assets

Sequoia Capital Partner Michelle Bailhe joins Yahoo Finance Live to discuss the company's new crypto fund, President Biden's executive order to regulate cryptocurrencies, and the outlook for venture capital investments into blockchain technologies.

Video Transcript

AKIKO FUJITA: Well, Sequoia Capital is doubling down on crypto. The venture capital firm recently created a subfund, setting aside $500 to $600 million dedicated mostly to liquid tokens and digital assets. Joining us to discuss is a partner at Sequoia Capital, Michelle Bailhe. And Michelle, it's great to talk to you today. I want to start by talking about the structure of this fund because it's not sort of the usual VC route that you have gone. Three specific subfunds raising money, why go that route? And talk to me about the structure of all of this.

MICHELLE BAILHE: Sure, and thank you so much for having me. So part of our goal at Sequoia is to be long-term thinkers and long-term partners and founders. And so we recently innovated on the traditional VC model with the long-term Sequoia Capital fund. And so as part of that, we innovated on these subfunds, so those funds that will eventually feed the long-term fund with assets that will hold for an indefinite amount of time.

And part of those are a new crypto fund, a new expansion fund, in addition to our classic seed venture and growth funds. So what this is allowing us to do is have a full stack product from seed all the way to liquid token or IPO for every founder and every sector of technology, including crypto.

DAVID HOLLERITH: Hey, Michelle, David Hollerith, crypto reporter, here. I just want to say thanks for coming on the show. And also, so I've heard a lot that there were conversations with founders like Sam Bankman-Fried of FTX and Jack Dorsey and many others, as far as sort of the inspiration behind sort of this move, which it sounds like your crypto-focused fund, it's mainly investing in liquid tokens. Could you tell me more about those conversations you had? Sort of like, what was the inspiration?

MICHELLE BAILHE: Yes, of course, and it's great to speak with you. So we've had a lot of feedback. So we've been investing in crypto for several years now. And so we've had feedback from many of our founders as to the best ways to serve them. And there are some equity-based companies in crypto that we serve very well.

And then there are more token-based crypto companies who increasingly wanted us to be more active with our tokens, so voting on governance protocols or providing liquidity to a protocol or staking to help secure a network. And this new fund gives us the ability to do that. So now we have a fully crypto native pocket within the full force of Sequoia.

JARED BLIKRE: I'm wondering how you compete with other VC firms. And let me explain where I'm going with this. I've heard of a lot of brain drain and also a war for talent among these crypto funds. They're draining a lot of this talent from traditional companies like Apple, Facebook, Microsoft, at the expense of some of their own employees. I'm just wondering, is it difficult to locate opportunities? Do you end up in a bidding war with other venture capital firms here? I'm just wondering what the landscape looks like for you.

MICHELLE BAILHE: Sure, yes, every sector of technology, investing in crypto included, is competitive. And it's competitive for investments. It's also competitive-- the companies are competing for talent. So it's a highly competitive industry, and that's why we work really hard to continue to innovate on the products we offer founders and the ways that we support them.

I think sometimes there's a misconception that crypto companies only have crypto challenges, when, in fact, every company that I work with-- you mentioned Sam at FTX, as well as Fireblocks-- their challenges include crypto challenges and broader typical company building challenges, whether it's hiring, as you mentioned the war for talent, whether it's product strategy, whether it's entering new markets. And so we bring the full force of Sequoia to those to help. And that usually helps us put us in a good position.

DAVID HOLLERITH: Now Michelle, after Biden's executive order on cryptocurrency was released yesterday, you know, there was sort of a rise in the market, and that's fallen. And obviously, as a venture capitalist, I know you're not paying as much close attention to short-term price fluctuations, but it was sort of a milestone for the industry.

And so I was sort of curious. Your fund is clearly looking at a lot of different parts of the crypto sector. But is there any sort of milestone coming down the horizon that you're sort of looking at in the near-term as the next thing that is very important to play out in terms of maybe the sector as a whole or one specific area that that plays into your investment?

MICHELLE BAILHE: Yes, it's a great question. So we were very pleased with the executive order. I think it's a great step forward. Many of the great founders that we work with, Sam and others, are eagerly working with regulators to make sure we have smart regulation that protects consumers, businesses, and also protects innovation in the space.

So I think, you know, we are continuing to watch the regulatory environment unfold. We think smart regulation will be long-term beneficial to crypto. And then we're also watching developer momentum. That's really an important signal to us where we see development happening on different layer one blockchains that informs our investment strategy. And so we've been very focused on cross-chain interoperability as areas that we are focusing on.

DAVID HOLLERITH: Yeah, I mean, your approach is-- I think most of the analysts I speak with, you know, they tend to lump cryptocurrency as sort of related to finance or overlapping part of finance. And your sort of look at the industry is a lot more holistic seemingly in terms of media. So I was sort of wondering, what exactly is, I guess, your thesis going forward? And if you could maybe take that in sections, just given the fact that it's quite broad.

MICHELLE BAILHE: Yeah, of course. So the most concise way to share our thesis-- and you're absolutely right. It's a broad look at the sector as an important, new area of technology. And some of that technology will impact the financial sector. Some of it will impact consumers and applications such as social media, marketplaces, and other internet applications. And some of that will impact enterprise infrastructure. And we're investing broadly in all of that.

So I think the most concise way to share our thesis would be that digital assets are fundamentally useful to people. It can be useful in a lot of different ways and for a lot of different purposes to people all over the globe. How I use Bitcoin might be very different from the way someone in Colombia uses Bitcoin, for instance.