Mercor Founder Accuses Sequoia of Price Manipulation

In recent days, startup founders and investors have been sharing their stories on the social network X about inappropriate behavior by venture capitalists (VC). Complaints include investors falling asleep during meetings or suggesting founders fire their partners. However, Brendan Foody, co-founder of the AI platform Mercor, valued at $10 billion, made a more serious accusation. Techcrunch.com reports .

Foody accused Sequoia Capital, one of the world's most prestigious venture firms, of a "two-tier pricing" scheme. According to him, the company invests at two different valuations simultaneously: while the main investment is made at a lower price, a smaller portion is formalized at a very high price. As a result, the huge valuation announced to the public creates an illusion of false victory in the market, while the investor's actual average entry price is much lower.

For example, the startup Serval announced it had raised $75 million at a $1 billion valuation. However, according to The Wall Street Journal, Sequoia's actual entry point for this project was only $400 million. A similar situation was observed with the startup Aaru, where investor Redpoint invested at a $450 million valuation, despite the "headline" price of $1 billion.

Sequoia partner Shaun Maguire responded to Foody's accusations. He emphasized that calling this practice "Sequoia fraud" is unfair. Maguire explained that when other investors are willing to pay excessively high prices for AI startups, Sequoia is forced to split capital into two parts to maintain its relationships. In his opinion, this is a market reality with no intention to deliberately mislead people.

Brendan Foody acknowledged that not only Sequoia but also other firms use this tactic. While such dual-pricing structures help boost a startup's reputation and attract talented employees, they can undermine trust between founders and employees. Currently, this issue of "transparency" is causing heated debates in the venture market.