Sequoia injects $195 million into an ever-zealous seed environment

Sequoia Capital, a long-established venture capital firm, announced today that it has raised a $195 million dedicated seed fund, its fifth. The vehicle will be used to support founders in the United States and Europe; The capital will also be used to invest in future cohorts or the Arc program, an internal Sequoia initiative that invests between $500,000 and $1 million in aspiring founders around the world and is currently accepting applications.

The capital comes as the pre-seed and seed world, which is already a growing part of the startup ecosystem, becomes even more attractive to investors looking to stay away from the turmoil of the later-stage market. AngelList data released today tells part of the story, noting that mean pre-seed valuations have held steady quarter-over-quarter for the past year, while later-stage deals, such as Series B, have fallen by almost a third .

said Jess Lee, partner at Sequoia and co-founder of All Raise on twitter that the company will look for potential breakaway founders across all industries, but specifically cited artificial intelligence and social consumers as two areas it’s investing in.

In a blog post announcing the seed fund, other partners indicated similar areas of interest. Alfred Lin pointed to augmented reality and virtual reality as the enablers for the “next consumer platform to drive broad-based innovation.” Shaun Maguire said that “hardware will always have my heart.” Roelof Botha, Sequoia’s recently appointed global head, kept it simple, writing in the post that he’s looking for founders who will benefit from a more disciplined market and the falling costs of automation, artificial intelligence, and even genetic sequencing.

In an email exchange this morning, Sequoia partner Stephanie Zahn said that “it’s never too early to partner with Sequoia, ask thought-provoking questions, introduce them to potential customers, and dream together about their vision.”

Zahn noted that Sequoia has written seed checks into a number of what were once fledgling startups that have grown into big brands, including Airbnb (Sequoia originally invested around $600,000 in the company); Dropbox (it pocketed around $950,000 early) and Nubank ($1 million).

Zahn noted that Sequoia also worked with still-private payments giant Stripe “when they didn’t have a single line of code”; it was the first investor in Whatsapp; and Palo Alto Networks and YouTube were incubated at its offices.

Sequoia, like many companies, has seen its portfolio humiliated during the downturn, which may affect how partners handle due diligence and sourcing in the year ahead. Just last week, Sequoia-backed GoMechanic shed 70% of its jobs, with its founder admitting in a LinkedIn post that the company “made grave miscalculations as we pursued growth at all costs.”

Other Sequoia portfolio companies with sizeable cuts include Bounce, Ola, and well, FTX. In fact, Sequoia’s $200 million investment in FTX has drawn valid criticism of the company’s track record of decision-making.

Lin, who interviewed TechCrunch’s Connie Loizos at her StrictlyVC event last week, said the experience didn’t dampen Sequoia’s interest in crypto. Despite saying that only 10% of Sequoia’s crypto fund has been deployed a year after its launch, he added that Sequoia remains “long-term bullish” on crypto.

Lin also told Loizos that “not-so-fun years are the best times to invest because all the tourists are gone,” a sentiment Zahn echoed in her exchange with TC today.

Zahn wrote: “The end of the foaming market of the last few years is positive. Constraints breed creativity and discipline. Many of today’s most transformative companies were founded in times of uncertainty, and we believe the same is true now.”