Breaking News: Sequoia Capital, a titan in the venture capital world, is making waves by investing in Anthropic, an AI startup that's a direct competitor to OpenAI, in which Sequoia is also invested. This move flies in the face of traditional VC practices, and it's got everyone in Silicon Valley talking!
Historically, venture capital firms have avoided backing companies that compete in the same sector, preferring to bet on a single winner. The rationale? To avoid conflicts of interest and protect their investments. But here's Sequoia, already invested in OpenAI and Elon Musk’s xAI, now also backing Anthropic. This raises eyebrows and sparks questions about the firm's strategy.
But here's where it gets controversial: The timing of this investment is particularly intriguing, especially considering what OpenAI CEO Sam Altman testified under oath last year. During a legal battle, Altman addressed rumors about restrictions in OpenAI's 2024 funding round. While he denied a blanket ban on investors backing rivals, he did admit that investors with access to OpenAI's confidential information were told that access would be terminated if they invested in competitors. This is considered an industry-standard protection against the misuse of sensitive information.
According to the Financial Times, Sequoia is joining a funding round led by Singapore’s GIC and U.S. investor Coatue, each contributing $1.5 billion. Anthropic aims to raise a staggering $25 billion or more, valuing the company at $350 billion — more than doubling its $170 billion valuation from just four months ago. Reports from the WSJ and Bloomberg had earlier estimated the round at $10 billion. Microsoft and Nvidia have committed up to $15 billion combined, with VCs and other investors contributing another $10 billion or more.
The connection between Sequoia and Sam Altman runs deep. Sequoia backed Altman when he dropped out of Stanford to start Loopt. He later became a “scout” for Sequoia, introducing the firm to Stripe, which became one of the firm’s most valuable portfolio companies. Sequoia's new co-leader Alfred Lin and Altman also appear comparatively close. Lin has interviewed Altman numerous times at Sequoia events, and when Altman was briefly ousted from OpenAI in November 2023, Lin publicly said he’d eagerly back Altman’s “next world-changing company.”
While Sequoia’s investment in xAI might seem to contradict the traditional VC approach, it's widely seen as more about strengthening ties with Elon Musk. Sequoia invested in X when Musk bought Twitter and rebranded it, and is also an investor in SpaceX, The Boring Company, and Neuralink. Former Sequoia leader Michael Moritz was even an early investor in Musk’s X.com, which became part of PayPal.
And this is the part most people miss: Sequoia's apparent shift on portfolio conflicts is especially striking given its past actions. In 2020, the firm made the unusual decision to walk away from its investment in payments company Finix after determining it competed with Stripe. Sequoia forfeited its $21 million investment, relinquishing its board seat, information rights, and shares. This marked the first time in the firm’s history it had severed ties with a newly funded company over a conflict of interest. (Sequoia had led Finix’s $35 million Series B round just months earlier.)
The reported Anthropic investment comes after significant leadership changes at Sequoia, where Roelof Botha was unexpectedly pushed out. Alfred Lin and Pat Grady took over. Anthropic is reportedly preparing for an IPO that could come as soon as this year. We've reached out to Sequoia Capital for comment.
Connie Loizos has been reporting on Silicon Valley since the late '90s. She was named Editor in Chief and General Manager of TechCrunch in September 2023. She's also the founder of StrictlyVC, a daily e-newsletter and lecture series acquired by Yahoo in August 2023 and now operated as a sub brand of TechCrunch.
What do you think? Is Sequoia's move a sign of changing times in the VC world, or is there more to the story? Share your thoughts in the comments!
