Sequoia's Dual Pricing Accused by Mercor Founder

Brendan Foody, co-founder of AI talent platform Mercor (valued at $10 billion), has strongly criticized top venture capital firm Sequoia. On X (formerly Twitter), Foody pointed out that Sequoia routinely engages in a practice called “dual pricing,” where it invests in the same round at different valuations. He exposed a serious gap between the publicly announced “headline valuation” and the actual investment price.

Core of the Issue

This method, which Foody dubbed a “Sequoia scam,” has been practiced tacitly in the VC industry for years. According to a TechCrunch report, this practice is not limited to specific funds. It has become clear that multiple top-tier VCs, not just Sequoia, are conducting deals under similar conditions.

Here’s how it works. The lead VC invests a large amount of capital at a low valuation, while simultaneously putting in a very small amount at a significantly higher valuation. Only the higher valuation is then announced in press releases and news reports. This gives the market the impression that “this startup achieved a valuation of X billion dollars,” creating an image of a dominant winner. However, the lead VC’s actual average acquisition price is far lower than the announced figure.

Foody stated in his X post: “Over the past six months, I’ve seen half a dozen rounds where Sequoia invests in two tranches. Everyone pretends only the higher valuation exists. Founders lie to employees about it and pitch angels the same way.”

Specific Examples

This gap appeared in a particularly striking way in the case of Serval, an AI-driven IT helpdesk startup. Serval announced a $75 million Series B at a $1 billion valuation. However, according to a Wall Street Journal report, Sequoia’s actual minimum entry point was only a $400 million valuation—less than half of the announced figure.

Another case is Aaru, a startup that uses AI to simulate user behavior for market research. The company announced a headline valuation of $1 billion, but lead investor Redpoint actually backed it at a $450 million valuation.

These examples vividly illustrate what Foody calls the “gap between perception and reality.” In the startup ecosystem, valuation is a measure of credibility and directly affects the value of employee stock options and subsequent fundraising terms. The risk of this gap causing misunderstandings within an organization cannot be ignored.

Sequoia’s Rebuttal

Sequoia partner Shaun Maguire directly responded to Foody’s criticism. On X, Maguire said: “I’ve seen this kind of behavior too, but calling it a ‘Sequoia scam’ is unfair. In my seven years at Sequoia, this has happened only about five times. What happens is that other investors offer multiples of the price we’re willing to pay for a hot company. So we try to decouple our partner relationship with the company from the capital, resulting in two tranches at different valuations within a close timeframe.”

Maguire continued, “I don’t think there’s anything opaque here,” adding, “If anyone sees misleading behavior, let me know. VC is a repeat game, and it wouldn’t make sense for us to try to mislead people.”

Maguire’s explanation frames the practice not as intentional manipulation but as a market reality: Sequoia is not willing to pay as much as competitors, and they structurally adjust their investment terms.

A Structural Industry Problem?

This issue goes beyond the ethics of individual funds. It undermines trust in startup valuations themselves. Valuations affect employee motivation, subsequent investor decisions, and even IPO pricing. If announced figures do not reflect reality, information asymmetry in the entire ecosystem widens.

In the AI sector especially, huge valuations are reported almost daily. Recently, OpenAI filed for an IPO with the SEC, reportedly at a $852 billion valuation (OpenAI Files for IPO with SEC at $852 Billion Valuation). While not confirmed, it is impossible to deny that similar practices could exist behind such massive numbers.

Editorial View

In the short term, Foody’s accusation will likely increase pressure on valuation transparency in the VC industry. Because it spread on X (Twitter), awareness of “dual pricing” may rapidly grow among founders and angel investors. This could accelerate efforts by employees to accurately assess the real value of their stock options.

In the long term, the information disclosure standards of the VC industry itself will be questioned. Currently left to self-regulation, regulatory involvement may need to be considered. The SEC has already shown interest in secondary trading and valuation disclosure by startups, and this case could well trigger additional regulatory tightening.

However, as Maguire’s rebuttal suggests, if this practice is a result of market competition rather than intentional fraud, it cannot be resolved by simple condemnation alone. VCs value long-term relationships with founders, so deliberate deception would damage their own reputation. Still, the structure that creates information asymmetry harming employees and small-scale investors should be improved.

The editorial board believes that the media reporting startup valuations also bears responsibility. Rather than taking press releases at face value, deeper reporting on actual investment terms is needed. Additionally, founders should honestly communicate the reality of valuations to their employees, a perspective that is important for building long-term trust.

References

• Mercor’s Brendan Foody calls out Sequoia over ‘dual-pricing’ valuation tricks - TechCrunch — Published June 9, 2026
• OpenAI Files for IPO with SEC at $852 Billion Valuation - singulism.com — Internal related article