Sequoia Breaks VC Taboo, Invests in Anthropic Rival: FT
▼ Summary
– Sequoia Capital is reportedly joining a major funding round for AI startup Anthropic, which is seeking to raise $25 billion or more at a $350 billion valuation.
– This move is notable because it breaks the traditional venture capital practice of avoiding investments in competing companies, as Sequoia is already an investor in both OpenAI and xAI.
– The investment follows OpenAI CEO Sam Altman’s previous statement that investors with access to its confidential information would lose that access if they made non-passive investments in competitors.
– Sequoia’s investment in xAI is viewed less as backing an OpenAI rival and more as deepening its extensive, long-standing ties to Elon Musk and his various companies.
– This apparent reversal is stark given Sequoia’s history, such as when it forfeited a $21 million investment in Finix due to a conflict of interest with its portfolio company Stripe.
In a move that challenges long-standing venture capital conventions, Sequoia Capital is reportedly joining a massive funding round for Anthropic, the artificial intelligence firm responsible for the Claude chatbot. This development, reported by the Financial Times, places the storied venture firm in a unique position, as it is now backing multiple major players in the fiercely competitive generative AI sector. The firm already holds investments in both OpenAI and Elon Musk’s xAI, making its support for a direct rival like Anthropic a significant departure from the industry’s traditional practice of avoiding portfolio conflicts.
The investment is particularly notable given recent testimony from OpenAI’s CEO, Sam Altman. During legal proceedings last year, Altman clarified that while investors were not broadly barred from funding competitors, those with access to OpenAI’s confidential information would lose that access if they made active investments in rival companies. He described this safeguard as an industry-standard protection against the misuse of competitively sensitive information. Sequoia’s decision to proceed with the Anthropic round, therefore, raises questions about the nature of its information-sharing agreements and its strategic positioning within the AI landscape.
According to the report, Sequoia is joining a round led by Singapore’s sovereign wealth fund GIC and the U.S. investment firm Coatue, with each contributing approximately $1.5 billion. Anthropic is seeking to raise up to $25 billion at a staggering valuation of around $350 billion, a figure that more than doubles its estimated worth from just a few months prior. Other major backers in the round are said to include Microsoft and Nvidia, which have together committed up to $15 billion, with additional capital expected from other venture investors.
The relationship between Sequoia and Sam Altman adds a layer of complexity to this situation. Altman’s first startup, Loopt, was funded by Sequoia, and he later served as a scout for the firm, famously introducing them to the payments company Stripe. Furthermore, Sequoia’s new co-leader, Alfred Lin, has publicly expressed strong support for Altman, stating he would eagerly back Altman’s “next world-changing company” following his brief ouster from OpenAI in late 2023.
While Sequoia’s earlier investment in xAI could be viewed as a similar conflict, many analysts see that bet as less about backing an AI competitor and more about deepening the firm’s extensive financial ties to Elon Musk. Sequoia has invested across Musk’s empire, including in X, SpaceX, The Boring Company, and Neuralink. This latest move into Anthropic, however, represents a clearer and more direct investment in a core OpenAI rival.
This apparent shift in strategy is stark when contrasted with Sequoia’s historical stance on conflicts. In a notable 2020 incident, the firm completely severed ties with payments startup Finix, forfeiting a $21 million investment, after determining the company competed with its portfolio giant, Stripe. That decision was described as unprecedented in the firm’s history. The reported Anthropic investment follows recent leadership changes at Sequoia, where Roelof Botha was replaced by Alfred Lin and Pat Grady, the same partner who led the firm’s exit from Finix.
As Anthropic reportedly prepares for a potential initial public offering later this year, Sequoia’s participation in this landmark funding round signals a bold, new approach to portfolio construction in the high-stakes world of artificial intelligence, where the rules of engagement appear to be rapidly evolving.
(Source: TechCrunch)
