Mercor’s Brendan Foody calls out Sequoia over ‘dual-pricing’ valuation tricks
Brendan Foody, co-founder of AI talent platform Mercor, has accused venture capital firm Sequoia of engaging in a "dual-pricing" valuation strategy. This practice involves investing in a company through two tranches, one at a lower preferential valuation and another at a higher announced valuation, which can mislead founders, employees, and other investors. Sequoia partner Shaun Maguire acknowledged the practice but defended it as a market reality driven by competition for hot AI companies, rather than a deliberate scam. While the practice can inflate a startup's perceived worth, experts suggest that independent 409A appraisals should theoretically price employee stock options based on the blended value, mitigating the impact of headline valuations. AI
IMPACT This practice may mislead founders and employees about company value, potentially impacting talent acquisition and retention in AI startups.