Mercor's Brendan Foody calls out Sequoia, accusing it of 'dual-pricing' valuation tricks
Brendan Foody, co-founder of the $10 billion AI talent platform Mercor, publicly accused Sequoia of "dual-pricing," a tactic where a lead investor buys most of its equity at a low valuation while a tiny slice goes in at a far higher price to set the announced headline number. Foody said he has seen about a half dozen rounds in the past six months where Sequoia invested in two tranches at two different prices. Sequoia partner Shaun Maguire pushed back, calling the two-tranche structure a response to outside investors willing to overpay, not deception.
Key Takeaways
- Sequoia is just one of the top firms that sells same equity at two different prices.
In recent days, founders and founders-turned-investors took to X to share horror stories about being mistreated by VCs.
- founders misrepresent this to their employees & then shop it to angels too."
TechCrunch has previously reported on VCs investing in the same round at different valuations.
- At Aaru, a startup that uses AI to simulate user behavior for market research, lead investor Redpoint backed the company at a $450 million valuation despite an announced $1 billion headline price.
Sequoia's Shaun Maguire pushed back on Foody's characterization directly.
- VC is a repeated game, so it just doesn't make sense for us to try to mislead people.
- That's because employee stock options should theoretically be priced based on the blended value of all tranches - not the headline number - according to Jason Woon, partner in valuation and financial modeling at Armanino, whose firm provides the independent 409A appraisals startups use to set option prices.
Stats & Key Facts
- #Brendan Foody, co-founder of the $10 billion AI talent platform Mercor, publicly accused Sequoia of "dual-pricing," a tactic where a lead investor buys most of its equity at a low valuation while a tiny slice goes in at a far higher price to set the announced headline number.
- #Brendan Foody, co-founder of the AI talent platform Mercor, which was last valued at $10 billion , went so far as to call out Sequoia, arguably one of the most elite VC firms in the world.
- #For example, when the AI-driven IT help desk startup Serval announced a $75 million Series B at a $1 billion valuation led by Sequoia , the announcement didn't tell the whole story , according to The Wall Street Journal.
- #Days earlier, said the Journal, the company had been valued at less than $400 million as part of a Series A extension in which Sequoia participated - less than half the headline figure.
Sequoia is just one of the top firms that sells same equity at two different prices. In recent days, founders and founders-turned-investors took to X to share horror stories about being mistreated by VCs. Their complaints ranged from VCs falling asleep during pitch meetings to investors suggesting a founder fire a co-founder.
Brendan Foody, co-founder of the AI talent platform Mercor, which was last valued at $10 billion , went so far as to call out Sequoia, arguably one of the most elite VC firms in the world. "The 'sequoia scam' is worse than a single horror story," Foody wrote on X . "In the last 6 [months] ive seen a half dozen rounds where sequoia invests in 2 tranches.
everyone pretends they only did the higher valuation. founders misrepresent this to their employees & then shop it to angels too." TechCrunch has previously reported on VCs investing in the same round at different valuations.
For more details please read the original article at TechCrunch AI.
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