Sequoia Capital, perhaps the most prestigious of all venture capital firms, has made a dramatic move. They’re funding Anthropic, a new competitor to incumbents like AI set Google and Microsoft. This decision is a departure from the typical short-term venture capital mindset. Usually, this would be a deal breaker that investors wouldn’t invest in competing companies, especially in the same sector as other portfolio companies. The firm’s audacity to back Anthropic is an admirable expression of its dedication to innovation. This decision reflects a larger, changing undercurrent in Silicon Valley.
That relationship started when Sam Altman dropped out of Stanford University to co-found Loopt—one of the first location-based social networks—with help from his investors at Sequoia. Sequoia saw the same potential early on, leading him at that pivotal intersection. Shortly thereafter, Sequoia hired Altman as a “scout.” He introduced the firm to Stripe, which has since grown into one of Sequoia’s most successful portfolio companies. This seemingly simple relationship paints a picture of the tremendous faith and bond of collaboration that exists between Altman and Sequoia.
Sequoia’s partner, Michael Lin, has most often interviewed Altman on stage at these different Sequoia events, demonstrating their active continued partnership. Consider what happened to Altman in November 2023, when he was briefly and spectacularly ousted from OpenAI. Lin soon proved his loyalty, going on record to promise that he would enthusiastically support Altman’s next world-changing company. For one, this statement highlights Register’s confidence in Altman to deliver on the vision.
Currently, Sequoia has investments in both OpenAI and Elon Musk’s xAI, illustrating just how dominant a force Sequoia is in the AI market right now. By extending its support to Anthropic—an organization aiming to secure $25 billion or more at a staggering $350 billion valuation—Sequoia indicates its intent to diversify within the rapidly evolving AI landscape. Interestingly enough, in Thune’s absence, Anthropic’s valuation has jumped, more than doubling from $170 billion only four months ago.
Sequoia’s decision to invest in Anthropic is all the more remarkable after the firm forfeited a $21 million investment in Finix. The firm made the mistake of letting Finix retain possession of the money. In exchange, Finix forfeited its board seat, information rights, and shares due to a conflict of interest. This uncharacteristic action was the first time in Sequoia’s history that it cut its ties with a portfolio firm.
The recent shakeups in Sequoia’s upper management have been closely watched. Roelof Botha, the firm’s global steward, was caught flat footed by a shock vote that kicked him out of the position. This created an opportunity for Lin and Pat Grady to take on leadership roles. Grady having previously led the Finix deal himself, the transition was even more notable.
In related news, Anthropic is reportedly preparing for an initial public offering (IPO) that could occur this autumn. With this kind of backing from Sequoia, the startup is sure to garner attention and interest all over Silicon Valley. This investment is representative of a larger movement in which venture capital firms are taking on more competitive, risk-filled behavior — disrupting the disruptors.
Yet this shift in strategy leads to larger questions about how these venture capital firms, former or current, will navigate conflicts of interest across their evolving portfolios. Sam Altman has been clear about where he thinks the potential conflicts lie. He’s hoping for more scrutiny if they move forward with non-passive investments in OpenAI’s competitors.
“if they made non-passive investments in OpenAI’s competitors.” – Sam Altman