Sequoia Capital is reportedly joining a massive funding round for Anthropic, the AI startup behind Cloud. According to the Financial Times. It’s a move that’s sure to turn heads in Silicon Valley.
Why? Because venture capital firms have historically avoided backing competing companies in the same sector, preferring to place their bets on a single winner. However, Sequoia, which has already invested in both OpenAI and Elon Musk’s XAI, is now throwing its weight behind Anthropic as well.
This timing is especially surprising given what OpenAI CEO Sam Altman said under oath last year. As part of OpenAI’s defense against Musk’s lawsuit, Altman addressed rumors about restrictions in OpenAI’s 2024 funding round. While he denied that OpenAI’s investors were broadly barred from backing competitors, he acknowledged that investors with continued access to OpenAI’s confidential information were told that access would be terminated “if they make non-passive investments in OpenAI’s competitors.” Altman called this “industry standard” protection (and it is) against misuse of competition-sensitive information.
According to the Financial Times, Sequoia is joining a financing round led by Singaporean company GIC and American investor Coatue, each contributing $1.5 billion. Anthropic aims to raise $25 billion or more at a $350 billion valuation — more than double its $170 billion valuation just four months ago. The Wall Street Journal and Bloomberg had previously reported that the round was worth $10 billion. Microsoft and Nvidia have combined committed up to $15 billion, and venture capital firms and other investors are said to contribute another $10 billion or more.
Sequoia’s relationship with Altman runs deep. When Altman dropped out of Stanford to start Loopt, Sequoia backed him. He later became a “scout” for Sequoia, introducing the company to Stripe, which became one of the most valuable companies in the company’s portfolio. Sequoia’s new co-leader Alfred Lin and Altman also appear to be relatively close. Lin interviewed Altman several times at Sequoia events, and when Altman was briefly fired from OpenAI in November 2023, Lin publicly said he would eagerly support “the next Altman company that changes the world.”
While Sequoia’s investment in xAI may indeed appear to contradict the traditional venture capital approach to picking winners, this bet is widely viewed as less concerned with backing an OpenAI competitor and more with deepening the company’s extensive ties with Elon Musk. Sequoia invested in X when Musk bought and renamed Twitter, is also an investor in SpaceX and The Boring Company, and is a major backer of Neuralink, Musk’s brain-computer interface company. Former longtime Sequoia leader Michael Moritz was an early investor in Musk’s X.com, which became part of PayPal.
Sequoia’s apparent reversal in the portfolio’s struggles is particularly stark given its historical position. As we reported in 2020, the company took the unusual step of divesting from its investment in payments company Finix after identifying the startup as a competitor to Stripe. Sequoia lost its $21 million investment, allowing Finix to keep the money while giving up its board seat, information rights and stock, marking the first time in the company’s history that it had severed ties with a newly funded company due to a conflict of interest. (Sequoia had led Finix’s $35 million Series B round just months earlier.)
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The aforementioned Anthropian investment comes after sweeping leadership changes at Sequoia, where the company’s global chief, Roelof Botha, was forced to step down in a shock vote just this fall. After days of sitting With this editor at TechCrunch Disrupt, with Lynn and Pat Grady — who led that Finix deal — taking over.
Anthropic is reportedly preparing for an IPO that could come as soon as this year. We have reached out to Sequoia Capital for comment.
