According to the Financial Times, Sequoia Capital is participating in a major funding round for Anthropic, the AI startup behind Claude. This is a move that is sure to garner attention in Silicon Valley.
why? That’s because venture capital firms have historically avoided supporting competitors in the same sector, preferring to bet on a single winner. But here’s Sequoia, which has already invested in both OpenAI and Elon Musk’s xAI, and is now focusing on Anthropic as well.
The 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 limits on OpenAI’s 2024 funding round. He denied that OpenAI’s investors were broadly prohibited from supporting rival companies, but acknowledged that investors with continued access to OpenAI’s confidential information were told that their access would be terminated “if they made passive investments in OpenAI’s competitors.” Mr. Altman called this an “industry standard” protection (and it is) against the misuse of competitively sensitive information.
According to FT, Sequoia is participating in a funding round led by Singapore’s GIC and US investor Coatue, with each investing $1.5 billion. Anthropic is aiming to raise more than $25 billion at a valuation of $350 billion, more than double its $170 billion valuation just four months ago. WSJ and Bloomberg previously reported that the round was worth $10 billion. Microsoft and Nvidia are said to have invested up to $15 billion together, with VCs and other investors contributing an additional $10 billion or more.
The connection between Sequoia and Altman runs deep. When Altman dropped out of Stanford University to start Loupt, Sequoia supported him. He later became a “scout” for Sequoia, introducing the company to Stripe, which became one of its most valuable portfolio companies. Altman also appears to be relatively close to Sequoia’s new co-leader Alfred Lin. Lin has interviewed Altman multiple times at Sequoia events, and when Altman was temporarily expelled from OpenAI in November 2023, Lin publicly stated that he would enthusiastically support Altman’s “next world-changing company.”
Sequoia’s investment in xAI may already seem at odds with the traditional VC approach of picking winners, but the bet is widely seen to be less about backing OpenAI’s competitors and more about deepening the company’s broader relationship with Elon Musk. Sequoia invested in X when Musk bought and rebranded Twitter, is an investor in SpaceX and The Boring Company, and is a major backer of Musk’s brain-computer interface company Neuralink. Former longtime Sequoia leader Michael Moritz was also an early investor in Musk’s X.com, which became part of PayPal.
Sequoia’s apparent reversal in portfolio conflict is especially striking given its historical stance. As we reported in 2020, the company took the unusual step of withdrawing from its investment in payments company Finix after determining that it competed with Stripe. Sequoia forfeited its $21 million investment and Phoenix kept the money while giving up his board seat, information rights and stock, making it the first company in its history to sever ties with a newly funded company due to a conflict of interest. (Sequoia had led Finix’s $35 million Series B round a few months earlier.)
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The reported investment in Anthropic comes after a dramatic management change at Sequoia. Roelof Botha, Sequoia’s global steward, was ousted in a surprise vote this fall, days after speaking with this editor at TechCrunch Disrupt, and replaced by Lin and Pat Grady, who led the Phoenix deal.
Anthropic is reportedly preparing for an IPO that could occur as early as this year. We have reached out to Sequoia Capital for comment.
