One of Sequoia’s most prominent investors, managing partner Roelof Botha, sees signs of another greed cycle brewing in venture capital, one where the least sophisticated investors will likely get most hurt.
He posted a warning on X on Thursday, writing, “We remain destined to repeat the mistakes of the past! SPVs are making a come-back, where the lead investor speaks for less than 10% of the capital, yet eagerly lines up the latest set of tourist chumps who think the story will end differently this time. It’s only been 3 years.” (He punctuated the post with an exploding-head emoji.)
That last cycle ended badly. In 2022, the overheated VC market of 2021 crashed. The fallout is still ongoing, with 2025 expected to be another brutal year of failed startups.
Botha is specifically warning about special purpose vehicles (SPVs) — a structure that allows a startup’s investor to sell access to a chunk of their shares to others. But the new investors are not actually buying shares in the startup; they are buying shares of the SPV, often at greatly inflated prices. That means the startup’s valuation would have to soar just for some of the SPV share owners to break even.
SPVs are becoming especially common in AI investing, where some startups are raising astronomical sums. A search of SEC filings finds at least nine SPVs tied to Anthropic since 2024 alone. The company is reportedly in talks to raise another $3.5 billion.
Figure AI’s attempt to raise $1.5 billion is also reportedly full of SPVs, per the Information. Note that neither company is in Sequoia’s portfolio.
The trend isn’t limited to just a few companies. Nearly every major multi-billion AI company has investors offering SPVs. And if a big-name VC firm firm — say, Sequoia’s archrival Andreessen Horowitz — is leading the deal, that name alone can lure in buyers.
One person involved in the secondaries markets describes SPV-laden deals like this: “They are passing the hat on all the deals that can’t find enough VC investors and the name firm puts up a tiny amount and these stupid family offices say oh, ‘Andreessen is leading it must be good,’ even though we know that these are their worst companies that can’t raise money from traditional VCs.”
Botha’s message to these would-be investors? “Don’t buy it.”
Sequoia did not immediately respond to a request for further comment.
