Mercor's Brendan Foody accuses Sequoia of ‘dual-pricing’ scam in VC rounds

Brendan Foody, co-founder of AI talent platform Mercor (last valued at $10B), went public on X accusing Sequoia of a systematic ‘dual-pricing’ scam. He claims that in the last six months, Sequoia has participated in multiple rounds by investing in two tranches at different valuations—a lower price for the bulk of its capital and a much higher price for a small portion that becomes the headline number. Foody says founders then misrepresent this to employees and angels, creating a false perception of company value. TechCrunch corroborates this with examples: AI startup Serval announced a $75M Series B at a $1B valuation led by Sequoia, but days earlier had closed a Series A extension at under $400M. Similarly, Aaru raised at a headline $1B valuation, but lead investor Redpoint backed it at $450M.

Sequoia partner Shaun Maguire pushed back, calling the practice rare (5 times in 7 years) and a natural response to market dynamics: “Other investors are willing to pay a high price for a hot company—usually AI—at multiples above what we’re willing to pay. So we decouple the company-building relationship from the capital, leading to two tranches.” He insists no deception is intended. However, critics argue the practice inflates startup worth for talent acquisition and fundraising. Employee stock options are theoretically set by 409A valuations, which are independent and tend to be conservative, but angels who write checks based on headline numbers may be misled. Foody’s callout highlights a growing tension in VC transparency, where perception and reality diverge significantly.