Sequoia China’s “Blockchain Empire”

Since Sequoia China invested in Huobi 7 years ago, it has successively invested in more than 14 blockchain or cryptocurrency projects such as Bitmain, Conflux, PayPal Finance, and Distributed Technology.

“If you can get top-level investment like Sequoia, then entrepreneurship will be half successful.” This sentence circulating in the entrepreneurial circle also applies to the blockchain industry.

A reporter from “Blockchain Daily” found that Sequoia Capital China Fund (hereinafter referred to as Sequoia China) invested in Huobi 7 years ago and has successively invested in more than 14 companies including Bitmain, Conflux, PayPal Finance, and Distribution Technology. Blockchain or cryptocurrency projects.

Although Shen Nanpeng has repeatedly claimed that he doesn’t know much about blockchain, Sequoia China’s move can be described as very sharp. Not only has invested in many top phenomenal projects, but also involved mining machine manufacturers, exchanges, underlying technology development companies, encrypted financial service providers, upstream and downstream applications, and other subdivision tracks.

It can be said that a blockchain investment empire of Sequoia China is taking shape.

Exchange track: Invest in Huobi and miss Binance

On July 29, the US Internet brokerage, known as the “retail investor base”, landed on Nasdaq.

Robinhood can be listed, and its crypto asset trading business is indispensable.

In February 2018, Robinhood launched its first free bitcoin and other cryptocurrency trading services. According to the data disclosed in its prospectus, in the first quarter of 2021, the company’s total revenue was US$522 million, of which 17% came from the crypto asset trading business, and the transaction volume reached US$88 billion, a year-on-year increase of 23 times.

After Robinhood’s cryptocurrency business was opened, Sequoia Capital (Overseas) began to pounce heavily on it one after another.

In March 2018, Sequoia Capital participated in Robinhood’s $363 million Series D financing for the first time. According to the data from Tianyan Check, from the D round to the G+ round on the eve of listing, Sequoia Capital has participated in every subsequent financing of Robinhood.

In fact, at the level of cryptocurrency exchanges, Robinhood is not the first investment goal of the Sequoia Capital system.

In 2018, Shen Nanpeng, the founder of Sequoia China, said in an interview with Wu Xiaobo: “I have invested in blockchain-related companies 4 years ago.” The relevant companies here include one of the world’s largest cryptocurrency exchanges. Huobi.

According to the industrial and commercial data displayed by Tianyancha, Huobi.com received several million U.S. dollars in financing from Sequoia China in March 2014. This is the first time that Sequoia China has set foot in cryptocurrency among the investment events publicly disclosed.

In August 2018, Huobi teamed up with Fission Capital to acquire Tongcheng Holdings, a listed company on the Hong Kong Main Board. Huobi’s equity was also disclosed for the first time. Sequoia China’s equity accounted for 23.3%, making it the second largest shareholder after Li Lin.

Sequoia China's "Blockchain Empire"

The shareholding structure disclosed by Huobi in August 2018

In addition, Sequoia China also anchored another exchange, Binance. However, due to various reasons, the two parties eventually went to court.

On the evening of May 7, 2018, Changpeng Zhao even announced to the public that in the future, all projects listed on Binance will need to disclose whether they are directly or indirectly related to Sequoia.

The approximate process of the story is: In August 2017, Binance and Sequoia talked about investment matters, and Sequoia gave a valuation of 80 million U.S. dollars; but the Bitcoin market soared and Binance developed rapidly. It has become the industry leader and has already exceeded the valuation of 80 million U.S. dollars. Later, Binance accepted the investment of IDG Capital. IDG gave a valuation that exceeded Sequoia’s 10 times; then Sequoia and Binance conducted a protracted Litigation.

On the exchange track, Sequoia Capital’s latest move is to invest in the emerging exchange FTX. On July 20th, FTX completed a US$900 million Series B financing at a valuation of US$18 billion, with Sequoia Capital among its investors.

Mining enterprise track: Bitmain, Bit Mining

Exchanges and mining machine companies are in the upper reaches of the industry, which can be described as a model of “lying down and making money”. In the mining circuit, Sequoia China has not only invested in Bitmain, the world’s largest mining machine company, but also in the latest and fast-growing mining company-US stocks Bit Mining.

In August 2017, Sequoia China led Bitmain’s US$50 million Series A financing, and continued to invest in Bitmain’s US$290 million Series B financing one year later.

Since Bitmain received angel investment in 2013, released the first mining chip BM1380 and launched the Antminer S1, it has become a giant in the industry.

Although Bitmain has not succeeded in listing, the outside world does not know its financial status. But what is certain is that Sequoia China’s investment can achieve huge returns.

Bitmain disclosed some data when it went to Hong Kong for its IPO in 2018. In 2017, the company achieved revenue of 2.5 billion U.S. dollars and net profit of 1.25 billion U.S. dollars; in the first quarter of 2018, revenue was 1.87 billion U.S. dollars, net profit was 1.14 billion U.S. dollars, and net profit margin reached 60%.

In addition to mining machines, Bitmain also owns AntPool, the number one mining pool in Bitcoin computing power, and BTC.com, the third mining pool. However, Bitmain has sold these two major mining pools.

Among them, the US stock Bit Mining acquired BTC.com. From April 1 to April 30, 2021, BTC.com brought about 55.3 million yuan (approximately US$8.4 million) in gross profit to Bit Mining.

Bit Mining, formerly known as 500 Lottery.com, was previously mainly engaged in online lottery sales. After the return of the founder on December 22, 2020, it switched to cryptocurrency mining.

It is worth noting that before the 500 lottery online market in 2013, Sequoia China subscribed for US$20 million in convertible bonds and US$15 million in private equity common stocks that were delivered at the same time as the IPO. Sequoia China has held shares of 500lottery.com until now and is currently the third largest shareholder of Bit Mining.

According to industry analysts, Bit Mining was able to acquire Bitmain’s mining pool BTC.com, which was facilitated by Sequoia China.

However, Sequoia China denied it to the reporter of “Blockchain Daily”.

Bitcoin mining is currently being cleaned up and rectified in China. Bit Mining announced on July 12 that it has signed a securities purchase agreement with certain institutional investors in the United States and will sell US$50 million worth of Class A common stocks and value by way of private placement. US$68.1 million in warrants. The company plans to use the proceeds from the issuance to purchase mining machines, build new overseas data centers, enhance technical infrastructure and corporate working capital.

With the launch of Bit Mining, Sequoia China’s investment puzzle includes mining machine manufacturers and cryptocurrency mining.

Other tracks: a system formed by points and faces

During the Ctrip period, Shen Nanpeng and his team had the habit of extending their business upstream and downstream. For example, in addition to Ctrip, an online travel service platform, it has also developed a series of Home Inns that serve accommodation.

As Sequoia China wrote when introducing Shen Nanpeng on its official website: “From point to aspect, focus on doing one thing first, and then slowly extend upstream and downstream to form a system.”

In addition to focusing on the exchanges and mining machine manufacturers at the top of the food chain in the early days of the industry, Sequoia China’s layout will gradually deepen the development of the underlying blockchain technology, encrypted financial service providers and downstream applications in subsequent investments.

In May of this year, Sequoia China participated in a US$50 million Series A financing of PayPal Finance, a crypto asset financial service provider. In August last year, Sequoia China participated for the first time in the Series A financing of Biaoxin Smart Chain, a public resource trading blockchain platform. In April this year, Sequoia China continued to follow up in the latter’s A+ round of financing.

Going back further, in July 2018, Sequoia China and Wanxiang led the $28 million private equity round of the blockchain technology project Nervos Network.

In 2017, the blockchain technology developer Distributed Technology completed the seed round of fundraising. It is also the Sequoia China teaming up with Fosun Group to participate in this investment.

In addition to investing in projects in person, Sequoia China has also adopted another more covert method-direct investment in blockchain funds.

In January of this year, Sequoia China announced the completion of its investment in Dragonfly Capital (Dragonfly Digital Capital) and became its strategic partner. According to the information, Dragonfly Capital is a venture capital fund focusing on the blockchain industry. It was initiated and founded by Feng Bo, the founding partner of Lianchuang Ceyuan, to lay out the global blockchain ecosystem through investment in early projects.

According to incomplete statistics from reporters of the “Blockchain Daily”, from 2014 to the present, Sequoia China has invested at least 14 in the blockchain industry, involving mining machine manufacturers, cryptocurrency exchanges, blockchain underlying technology development, and districts. Block chain applications, industrial capital institutions.

It can be said that Sequoia China has almost voted for a “blockchain empire”.

In response to Sequoia China’s investment philosophy in the blockchain industry, a reporter from “Blockchain Daily” asked Sequoia China for an interview, but the other party declined.

Sequoia China's "Blockchain Empire"

14 blockchain projects invested by Sequoia China

Observing the investment targets of Sequoia in the past two years, in addition to PayPal Finance, more emphasis has been placed on the underlying technology and applications of the blockchain, such as the twice-invested Biaoxin Smart Chain. This rule also coincides with the sharing of Fan Yonglin, vice president of Sequoia Capital, at the 2021 World Blockchain Conference.

“Blockchain may give birth to the next generation of infrastructure.” Fan Yonglin mentioned, for example, combining data sharing, security, privacy, etc., and forming a consensus infrastructure is his focus.

In addition, Fan Yonglin also said that in the integration with the industry, in the next stage of the explosion of big data applications, technologies that are not well applied in traditional Internet scenarios, such as privacy computing, are in data security, privacy protection, and knowledge. There will be huge opportunities in areas such as property rights.

“This can produce a synergistic effect.”

There is no doubt that blockchain, as a representative of cutting-edge technological innovation, is attracting the attention of global capital.

As early as 2018, Xu Xiaoping, the head of Zhen Fund, once called on entrepreneurs to “all in” the blockchain. This year, in an interview with Wu Xiaobo, Shen Nanpeng also mentioned that the blockchain “must be understood”.

Since the beginning of this year, as the cryptocurrency market has skyrocketed, investment and financing activities in the blockchain industry have been extremely active, and the amount of financing has also skyrocketed. According to statistics released by the industry media The Block, in the first half of 2021, blockchain projects and company financing amounted to 16.52 billion U.S. dollars.

Hash Capital co-founder Ye Ding told the reporter of “Blockchain Daily” that there has always been an unwritten rule in the industry. With the endorsement of top capital such as Sequoia China, the project will be sought after by everyone. “You don’t have to do anything. Its investment is the greatest recognition of the project itself.”

Huobi founder Li Lin also said in Moments earlier that for projects that have received investment from the world’s top VCs like Sequoia, they will get extra points when they are listed on the exchange.

“Blockchain Daily” reporters did not complete statistics. This year, the blockchain industry has produced 30 financing projects of hundreds of millions of dollars. Among them, Sequoia Capital participated in 4 cases, namely Fireblocks, FTX, Trade Republic, and Robinhood. In 2020, there will be only 5 financing projects worth hundreds of millions of dollars.

Yu Jianing, the rotating chairman of the Blockchain Special Committee of the China Communications Industry Association, told reporters that this year’s investment and financing activities have a characteristic. The financing rounds have entered the middle and late investment rounds from the past seed rounds, and some have even been listed or Is planning to prepare for listing.

This means that top investment institutions like Sequoia are playing an increasingly important role in the industry. In turn, Sequoia China’s investment approach of betting on top projects and covering the upstream and downstream of the industrial chain will further consolidate its position in the industry.

From the perspective of return on investment, for the institution itself, “this can produce synergies.” A serial entrepreneur in the blockchain industry told reporters that the company he founded had received investment from Sequoia China, but “the investor also Did not give us pressure to return on investment”.

Wang Haifeng, a senior researcher of Ouke Cloud Chain Research Institute, analyzed to the reporter of “Blockchain Daily” that the investment of traditional investment institutions in blockchain projects shows to a certain extent that the business logic of the blockchain industry is forming a closed loop, and there are more The value support that has already landed or is about to land is becoming more attractive to the mainstream market represented by traditional investment institutions.

 

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