Mercor's Brendan Foody calls out Sequoia's dual-price valuation play
Foody says some AI rounds are marketed at headline prices that do not match where lead investors put most of their money.
By Ryan Merket ยท Published
Why it matters
Dual-price rounds let AI startups advertise scarcity while giving lead investors better economics, shifting the information gap onto employees and smaller investors.
Brendan Foody, co-founder of Mercor, used a public fight over VC behavior to name Sequoia and a valuation structure that has become a quiet feature of hot AI rounds, TechCrunch reported Monday.
Foody is not a marginal complainant in that market. Mercor, the AI talent platform he co-founded, was last valued at $10 billion after a $350 million Series C in October 2025, according to TechCrunch. RuntimeWire reported last week on Foody's claim that Mercor spends more on AI agent tokens than salaries, a sign of how aggressively the company is building around automated work even as its core business sits inside the AI labor supply chain.
That makes his complaint land differently than the usual founder grievance about investor etiquette. Foody is saying the valuation number itself, the metric employees, angels and later investors use to understand the company, can be shaped by deal design.
"The "sequoia scam" is worse than a single horror story," Foody wrote on X, according to TechCrunch. "in the last 6 [months] ive seen a half dozen rounds where sequoia invests in 2 tranches. everyone pretends they only did the higher valuation. founders misrepresent this to their employees & then shop it to angels too."
The trick is the headline price
The structure Foody is attacking is simple: the same financing round can include capital sold at different prices. A lead investor may put a larger check into a company at a lower valuation, while a smaller allocation comes in at a much higher valuation. The company can then market the round using the higher number, even if that number does not reflect the price where the most consequential capital entered.
TechCrunch reported in March that some AI startups have been selling the same equity in the same round at different valuations. That reporting described the practice as a way to preserve a market-facing valuation while letting a favored investor buy in at a lower effective price.
The examples matter because they show this is not just a Sequoia story. TechCrunch cited Serval, an AI-driven IT helpdesk startup, which announced a $75 million Series B at a $1 billion valuation, while The Wall Street Journal reported that Sequoia's lowest entry point valued Serval at $400 million. TechCrunch also cited Aaru, an AI market research startup, where Redpoint backed the company at a $450 million valuation despite an announced $1 billion headline price.
Those gaps are not rounding errors. They change how employees think about the value of their equity, how angels price follow-on checks, and how rival founders benchmark their own rounds. In venture, the public valuation is not just a scoreboard. It is a sales tool.
Sequoia's answer: access and price can separate
Sequoia partner Shaun Maguire pushed back on Foody's framing in a post on X. Maguire did not deny that different-price tranches happen. He said it was unfair to brand the practice a "Sequoia scam" and said this kind of situation had happened "approximately five times" in his seven years at Sequoia.
Maguire's defense, as summarized by TechCrunch, is that other investors sometimes offer a high price for a hot company, "usually AI," at multiples above what Sequoia is willing to pay. In those cases, Sequoia may try to separate the company-building relationship from the capital price.
That is a credible description of the incentive stack. A founder wants the highest possible headline valuation because it strengthens recruiting, status and future fundraising. A lead investor wants access without swallowing the full market-clearing price. Smaller investors may accept a worse price to get into a scarce AI allocation. Everyone can say the round cleared at the headline valuation, while the lead investor's real economics are more complicated.
The person left with the least visibility is often the employee. Stock options are sold internally as participation in the company's upside. If the valuation employees hear is meaningfully above the price where an insider lead investor bought shares, then compensation math starts from a distorted baseline.
Why Foody is saying it now
Foody's post came during a broader wave of founders and founders-turned-investors sharing VC complaints on X, which TechCrunch covered last week. Many of those stories were about behavior inside meetings. Foody's is sharper because it moves from manners to market structure.
It also comes at a time when AI companies are under pressure to keep showing momentum through valuation marks. The hottest startups can raise money from investors willing to pay for access, but institutional leads still have return discipline. Dual pricing is what happens when those two forces collide: the market demands a trophy price, while the lead investor negotiates a private path around it.
Foody has not identified the specific half-dozen rounds he says he has seen. TechCrunch's reporting establishes that dual-price structures exist and gives named examples, but Foody's broader count remains his claim. Nor does the available reporting establish that Sequoia invested in Mercor.
Still, the public nature of the dispute is significant. Founders usually complain about terms privately because future fundraising depends on maintaining investor relationships. Foody, running a company already marked at a $10 billion valuation, has more room to say what earlier-stage founders often cannot: a valuation can be technically accurate and still leave employees and smaller investors with the wrong picture of who paid what.