🧠 Food for thought

Implications, context, and why it matters.

Sequoia’s new fund marks a change in how it backs rivals

• This fundraising comes after an internal strategy change at Sequoia, a firm that once avoided funding direct competitors 1.
• In 2020, Sequoia gave up a US$21 million investment in payments company Finix to avoid a conflict with its portfolio company Stripe 1.
• Sequoia now owns stakes in AI rivals OpenAI and xAI, Elon Musk’s AI company. The move departs from its past habit of backing one company per category 1.

The AI funding race nudges venture firms toward backing more than one winner

• By investing in competing foundation-model companies such as OpenAI and Anthropic, Sequoia treats the capital-heavy AI sector less like a typical startup lane and more like an oligopoly, a market dominated by a small number of large players 1.
• The bet assumes the market is too big and too expensive for a single winner. It also turns ownership in top players into an index-style wager on a broader AI platform shift 1.
• The approach could make multi-billion-dollar venture funds more common, while raising pressure across the venture capital industry 1.
• Money may cluster within a small group of top venture capital firms. That could leave newer AI infrastructure startups, which build the underlying computing and software tools for AI, facing a tougher fight for capital and hiring 1.