In the past few days, startup founders and former founders now working as investors have used X to recount alarming experiences of being mistreated by venture capitalists. Their grievances varied from venture capitalists dozing off in pitch meetings to investors urging founders to oust their co-founders. Brendan Foody, co-founder of the AI talent platform Mercor — last valued at $10 billion — went as far as publicly calling out Sequoia, widely considered one of the world’s most prestigious VC firms. “The ‘Sequoia scam’ is worse than a single horror story,” Foody wrote on X. “In the last 6 months I’ve seen a half dozen rounds where Sequoia invests in 2 tranches.” Everyone acts like they only went with the higher valuation. Founders misrepresent this to their employees and then pitch it to angels as well. TechCrunch has previously covered instances of VCs participating in the same funding round but at varying valuations. In this structure, the lead VC firm commits the majority of its investment at a lower, preferential valuation, while allocating a much smaller amount at a significantly higher price. The huge “headline” valuation that gets publicized creates the illusion of a clear market leader, while hiding the reality that the lead investor’s true average entry price was far lower. The difference can be dramatic. For instance, when AI-powered IT helpdesk startup Serval announced a $75 million Series B round at a $1 billion valuation led by Sequoia, the announcement omitted key details, according to The Wall Street Journal.
Mercor’s Brendan Foody calls out Sequoia, accusing it of ‘dual-pricing’ valuation tricks
- by stefan