Mercor’s Brendan Foody Calls Out Sequoia Over Dual-Pricing Valuation Tricks
A public dispute over VC transparency has erupted on X after Brendan Foody, co-founder of AI talent platform Mercor last valued at $10 billion publicly accused Sequoia of using Sequoia dual-pricing valuation tricks to manufacture inflated startup valuations. Foody described the practice as the “Sequoia scam,” claiming he had observed it across half a dozen funding rounds over the past six months alone.
The mechanism works like this: a lead VC firm invests the bulk of its capital at a lower, preferential valuation, then places a smaller amount at a significantly higher price. The elevated figure becomes the headline valuation announced publicly, creating the perception of a dominant market winner while masking the investor’s actual blended entry price. TechCrunch had previously reported on this growing pattern across AI startups.
The Numbers Behind the Headlines
The gap between optics and reality can be stark. When AI-driven IT helpdesk startup Serval announced a $75 million Series B at a $1 billion valuation, Sequoia’s actual lowest entry point reportedly valued the company at just $400 million less than half the headline. Similarly, at Aaru, a startup using AI to simulate user behaviour for market research, lead investor Redpoint backed the company at a $450 million valuation despite an announced $1 billion headline price.
Sequoia’s Shaun Maguire pushed back directly on X, framing the dual-tranche structure as a market reality rather than deception, arguing Sequoia simply decouples its relationship with founders from the capital when valuations exceed what it is willing to pay. Foody declined to comment further, and Sequoia did not respond to a request for comment. The debate has widened into broader concerns about ARR manipulation and whether VC-era metrics have lost their meaning entirely.
