OpenAI backer Sequoia Capital in talks to join Anthropic’s proposed $25B mega round – News

Sequoia Capital is set to join Coatue and Singapore’s sovereign wealth fund GIC in a blockbuster, multibillion-dollar round in the artificial intelligence startup Anthropic PBC, as part of a funding deal that’s sure to raise eyebrows among Silicon Valley investors.

It’s a surprising move by Sequoia because venture capital firms traditionally avoid backing competitors in the same industries, preferring to bet on a single winner to emerge. However, Sequoia has already thrown millions of dollars at both OpenAI Group PBC and Elon Musk’s xAI Corp., and is now eying a piece of a third major player in AI.

The investment may also carry a certain amount of risk for Sequoia, given what OpenAI Chief Executive Sam Altman said during testimony as part of his defense against a lawsuit filed by Musk against him and his company. At the trial last year, Altman talked about certain restrictions that were imposed on investors in his company’s 2024 funding round. He explained that investors are not prohibited from backing rival AI firms, but those who do so and have ongoing access to OpenAI’s confidential information could have that access terminated. According to Altman, it’s an “industry standard” protection put in place to protect the company against sensitive information being used against it.

In any case, the Financial Times reported that Sequoia is on the verge of joining a mega-funding round led by GIC and Coatue, who will each stump up $1.5 billion for Anthropic. The OpenAI rival is aiming to raise up to $25 billion in the round, which suggests that it could involve a fair few other investors, and that it would increase its valuation to a cool $350 billion once complete. That would be more than double the $170 billion valuation it announced just four months earlier, when it raised $13 billion.

Sequoia’s earlier investment in xAI can be explained by the fact that the VC firm is already one of Musk’s biggest financial backers. It previously invested in X Corp. when Musk bought the company, formerly known as Twitter Inc. It’s also one of the biggest investors in SpaceX Corp. and The Boring Company, as well as Musk’s brain interface technology startup Neuralink.

Still, the investment in Anthropic may irk Altman more, considering that the OpenAI founder has deep connections with Sequoia. The VC firm was one of the original backers of Altman’s first startup Loopt Inc., which offered location sharing services for early smartphone users. Altman later worked for Sequoia as a “scout” and helped introduce the firm to Stripe Inc., which later became one of the most valuable companies in its portfolio.

Sequoia’s move is all the more curious considering that it has previously stuck pretty firmly to the policy of not investing in competitors. In 2020, the VC walked away from its $21 million investment in the payments provider Finix Payments Inc., giving up the money, the shares it had acquired and all rights relating to the company, after deciding it was too competitive with Stripe.

Clearly though, the AI industry opportunity is a different kettle of fish and Sequoia seems to have opted for a completely different approach. One anonymous source told the Financial Times that it ultimately thinks OpenAI and Anthropic will head in different directions, catering to different aspects of the AI market, hence it doesn’t believe it makes sense to try and back only one winner.

There’s also the fact that Anthropic, best known for its chatbot Claude, is beginning to raise some serious money to consider. In December, it said its revenue had grown more than ten-times in the last year to over $10 billion annually. That suggests rampant growth, even for a company operating in an industry that’s scaling as quickly as AI.

Should it really invest in Anthropic, Sequoia may not have to wait long for an exit. Last year it was reported that the AI firm had hired the law company Wilson Sonsini to begin working on an initial public offering, and it’s also said to be talking with a number of banks about the same thing. If everything goes to plan, Anthropic could go public later this year, on roughly the same timeline as OpenAI itself.

Image: Anthropic