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Sequoia really made fools out of themselves here. When you listen to VCs they always sing their praises. Is it an emperor has no clothes situation?

by rapsey 4y ago

danuker 4y ago
Hindsight 20/20. But how have they sized their bet? Maybe $210M is a drop in the $85B AUM bucket for them, and maybe even including this loss they get better returns than the market, from their investments overall.
- deleted 4y ago
  [deleted]
- Ygg2 4y ago
  Hindsight 20/20? Anyone could tell you can't solve financial/social troubles with just moar tech. And a distributed hash collision generator couldn't gain that much $$$ without something super shady. This isn't hindsight 20/20. This is having eyes and not averting your gaze.
- klelatti 4y ago
  > Hindsight 20/20. Valid point if they had effective due diligence but they didn't. FTX on a cost basis was 3% of the committed capital for the fund that held FTX. A minimal amount of due diligence on FTX would have saved them $150m and increased the fund's return by 3% - not a trivial amount. Plus their name gave FTX credibility that probably led to others investing and losing money.
  - nico 4y ago
    > Plus their name gave FTX credibility that probably led to others investing This is key. Have some friends who got into YC. As soon as they did, they had investors offering them money who had barely even seen their deck. Probably the same happens with Sequoia. Investors see that Sequoia invested and they just blindly follow suit.
  - danuker 4y ago
    > A minimal amount of due diligence Exactly what due dilligence would have saved them? What numbers could they have looked at? How could they guard against those numbers being lies (cooked/parallel books)?
    - klelatti 4y ago
      I'd usually have some sympathy with this perspective but there were so many red flags with FTX that there should be no excuse. Just because sophisticated fraud can sometimes be hard to detect doesn't give you a free pass for problems that are easy to spot.
    - bmitc 4y ago
      > What numbers could they have looked at? How could they guard against those numbers being lies (cooked/parallel books)? That was part of the problem. The red flag should have been the fact that there were no numbers or books. Neither FTX nor Alameda even had a CFO.
MrPatan 4y ago
Didn't FTX invest 500M in Sequoia later?
Gatsky 4y ago
I would say the biggest fool is Temasek, Singapore's state investment fund, who set $275million on fire (0.1% of their net Portfolio). They really lost their minds on this one.
- petesergeant 4y ago
  Temasek turns an annualized return of 14%. If they didn't take occasional Ls on specific investments, it would suggest they have an insufficient appetite for risk. 0.1% of their net portfolio is a rounding error both when considered against both the portfolio itself, and their expected return for any given year.
  - klelatti 4y ago
    > If they didn't take occasional Ls on specific investments, it would suggest they have an insufficient appetite for risk. I agree with this but it's a complete non sequitur to say this then gives them a pass for losing money on FTX. If they took dollars and burned them live on TV would you say 'it's good they need to take an occasional loss'.
    - petesergeant 4y ago
      > If they took dollars and burned them live on TV would you say 'it's good they need to take an occasional loss'. The EV of burning money is zero. The EV of chucking some change into a firm that Sequoia has given $150m to and is writing glowing reviews of -- even with zero due diligence -- is probably pretty good.
      - klelatti 4y ago
        That’s a completely different argument to the one that I commented on. And if that’s what they were doing then it’s still pretty embarrassing.
      - Gatsky 4y ago
        Saying that Temasek has annual returns of 14% and that the EV of burning money is zero are logically inconsistent. The EV of burning $275million is actually about negative $1 billion over 10 years, offset by tax savings.

Sequoia really made fools out of themselves here. When you listen to VCs they always sing their praises. Is it an emperor has no clothes situation?

by rapsey 4y ago

Sequoia really made fools out of themselves here. When you listen to VCs they always sing their praises. Is it an emperor has no clothes situation?

danuker 4y ago

Hindsight 20/20. But how have they sized their bet? Maybe $210M is a drop in the $85B AUM bucket for them, and maybe even including this loss they get better returns than the market, from their investments overall.

deleted 4y ago
[deleted]
Ygg2 4y ago
Hindsight 20/20? Anyone could tell you can't solve financial/social troubles with just moar tech. And a distributed hash collision generator couldn't gain that much $$$ without something super shady. This isn't hindsight 20/20. This is having eyes and not averting your gaze.
klelatti 4y ago
> Hindsight 20/20. Valid point if they had effective due diligence but they didn't. FTX on a cost basis was 3% of the committed capital for the fund that held FTX. A minimal amount of due diligence on FTX would have saved them $150m and increased the fund's return by 3% - not a trivial amount. Plus their name gave FTX credibility that probably led to others investing and losing money.
- nico 4y ago
  > Plus their name gave FTX credibility that probably led to others investing This is key. Have some friends who got into YC. As soon as they did, they had investors offering them money who had barely even seen their deck. Probably the same happens with Sequoia. Investors see that Sequoia invested and they just blindly follow suit.
- danuker 4y ago
  > A minimal amount of due diligence Exactly what due dilligence would have saved them? What numbers could they have looked at? How could they guard against those numbers being lies (cooked/parallel books)?
  - klelatti 4y ago
    I'd usually have some sympathy with this perspective but there were so many red flags with FTX that there should be no excuse. Just because sophisticated fraud can sometimes be hard to detect doesn't give you a free pass for problems that are easy to spot.
  - bmitc 4y ago
    > What numbers could they have looked at? How could they guard against those numbers being lies (cooked/parallel books)? That was part of the problem. The red flag should have been the fact that there were no numbers or books. Neither FTX nor Alameda even had a CFO.

MrPatan 4y ago

Didn't FTX invest 500M in Sequoia later?

Gatsky 4y ago

I would say the biggest fool is Temasek, Singapore's state investment fund, who set $275million on fire (0.1% of their net Portfolio). They really lost their minds on this one.

petesergeant 4y ago
Temasek turns an annualized return of 14%. If they didn't take occasional Ls on specific investments, it would suggest they have an insufficient appetite for risk. 0.1% of their net portfolio is a rounding error both when considered against both the portfolio itself, and their expected return for any given year.
- klelatti 4y ago
  > If they didn't take occasional Ls on specific investments, it would suggest they have an insufficient appetite for risk. I agree with this but it's a complete non sequitur to say this then gives them a pass for losing money on FTX. If they took dollars and burned them live on TV would you say 'it's good they need to take an occasional loss'.
  - petesergeant 4y ago
    > If they took dollars and burned them live on TV would you say 'it's good they need to take an occasional loss'. The EV of burning money is zero. The EV of chucking some change into a firm that Sequoia has given $150m to and is writing glowing reviews of -- even with zero due diligence -- is probably pretty good.
    - klelatti 4y ago
      That’s a completely different argument to the one that I commented on. And if that’s what they were doing then it’s still pretty embarrassing.
    - Gatsky 4y ago
      Saying that Temasek has annual returns of 14% and that the EV of burning money is zero are logically inconsistent. The EV of burning $275million is actually about negative $1 billion over 10 years, offset by tax savings.