Sequoia Capital’s decision to invest in Anthropic marks a departure from the traditional venture capital rulebook and is being viewed as the death of the ‘one winner’ venture capital model. Historically, VCs have avoided backing rival companies in the same sector, preferring to bet on a single winner. Yet Sequoia—already an investor in OpenAI and Elon Musk’s xAI—has now added Anthropic to its portfolio.
It is not alone in breaking this long-standing taboo and hedging bets against its portfolio companies in the same sector. Andreessen Horowitz, which recently raised $15 billion to expand investments across infrastructure, healthcare and defence, has backed OpenAI, xAI, and OpenAI co-founder Ilya Sutskever’s Safe Superintelligence (SSI). Fidelity and Ark Invest have invested in both OpenAI and xAI, while Sound Ventures and Wisdom Ventures both hold stakes in OpenAI and Anthropic.
Sequoia itself invested in OpenAI in 2021 and later backed SSI in September 2024.
While Sequoia’s earlier investment in xAI appeared to contradict the traditional VC approach of choosing a single winner, that move was widely seen as an extension of the VC firm’s long-standing relationship with Elon Musk. It also holds stakes in SpaceX and The Boring Company, and is a major investor in Neuralink.
Sequoia is now joining a $25-billion funding round for Anthropic led by Singapore’s GIC and US investor Coatue, with the AI company seeking a valuation of $350 billion—more than double its $170 billion valuation from just four months ago.
AI is Changing Investment Strategies
Sequoia’s shift is particularly striking given its earlier stance on portfolio conflicts. In 2020, the firm exited payments startup Finix after concluding it competed with Stripe, another Sequoia-backed company, forfeiting its $21-million stake along with a board seat.
The Anthropic investment also follows a leadership transition at Sequoia in 2025, with veteran partner Roelof Botha stepping back from oversight of the US and Europe business, and Alfred Lin and Pat Grady taking charge. This came after a turbulent period marked by internal friction, a $200-million loss from cryptocurrency exchange FTX’s collapse, and a renewed focus on AI.
Some investors describe this approach as “spray and pray”—once applied to fintech and e-commerce, and now increasingly to AI. A similar pattern is emerging in India. Peak XV Partners (formerly Sequoia Capital India & SEA) has backed Sarvam AI, which is developing a foundation model, while also investing in application-layer companies such as Atlan and WizCommerce, which could eventually build competing in-house models.
Antler India, one of the country’s most active AI investors, backs multiple agentic AI startups, while Accel’s Atoms programme has funded a wide range of AI tools. Although these firms claim to maintain strict “Chinese walls” between partners to manage conflicts, they are increasingly open to backing multiple companies in the same vertical.
Traditionally, VCs picked sides—Uber or Lyft—and avoided funding direct rivals to preserve focus and loyalty. The scale and uncertainty of AI, however, have pushed many investors to abandon this rule.
“In foundational AI, there may not be a single winner,” Akhil Gupta, CTO and co-founder of NoBroker, tells AIM. “The stack is deeper, applications are broader, and variables like regulation, compute access, and talent make outcomes far less predictable.”
Suhail Sameer, founder and managing partner of OTP Ventures, notes that most Indian funds are investing in AI applications built atop infrastructure developed outside India. “These companies face the risk that core AI providers could outpace them with future upgrades.” While OTP avoids investing in direct competitors from the same fund, Sameer advises founders to avoid raising capital from investors with clear conflicts of interest.
Ethics And Trust
The debate over portfolio conflicts intensified after OpenAI CEO Sam Altman testified under oath last year in a lawsuit brought by Elon Musk. Altman acknowledged that investors with access to OpenAI’s confidential information would lose those rights if they made non-passive investments in competitors, describing this as an industry-standard safeguard.
For founders, the concern is straightforward. Investors often gain access to sensitive information on strategy, pricing, hiring and product roadmaps, raising fears that insights—deliberately or otherwise—could give an advantage to rival portfolio companies. Even with formal information barriers, perceived conflicts can erode trust and distort boardroom dynamics.
“When Nexus Venture Partners invested in Snapdeal while backing ShopClues, I was worried,” Sandeep Aggarwal, founder of e-commerce marketplace ShopClues and used vehicles startup Droom, remarks. Although Nexus argued the companies were not direct rivals at the time, Snapdeal later pivoted into a competing marketplace. Aggarwal questions whether a VC can genuinely maintain equal commitment to two rival businesses.
Meanwhile, Gupta believes conflicts are not inherently unethical but can become problematic if boundaries blur or influence is misused. “From a founder’s standpoint, transparency is critical—knowing upfront what exposure an investor has and what safeguards exist.”
Ashish Fafadia, partner at Blume Ventures, adds that pivots often cause company paths to converge. “VCs must ensure separate partners manage competing investments and maintain near-perfect Chinese walls to prevent information leakage.”
If the trend of investing in rival businesses is global, how can founders protect themselves?
“Founders can mitigate risks by setting guardrails early. This includes negotiating strict conflict-of-interest clauses, limiting information rights if investors back rivals, and enforcing board-level firewalls with recusals from sensitive discussions,” advises Aggarwal. Some founders may also require investors to take passive-only positions in competitors or forfeit information rights altogether if conflicts arise.
As capital increasingly concentrates around a handful of AI labs, traditional VCs have to navigate whether backing rivals accelerates innovation or undermines trust and confidentiality that startups cherish.
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