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Comment by rapsey | Hacker News Reader

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?

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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.

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.

> 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'.

> 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.

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.

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.

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.

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.

> 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.

> 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.

> 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)?

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.

> 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.

Didn't FTX invest 500M in Sequoia later?

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