Roelof Botha, managing partner and one of Sequoia's most prominent investors, sees signs that another greedy cycle is being cultivated in venture capital.
He posted a warning to X on Thursday, writing: SPV is making a comeback. There, the lead investor talks about less than 10% of the capital, but this time he eagerly lists the latest tourist champs who believe the story will end differently. It's only been three years. ” (He separated the posts with explosive head emojis).
That last cycle ended badly. In 2022, the overheating VC market crashed in 2021. The fallout is still ongoing, and 2025 is expected to be another brutal year in which startups failed.
Botha specifically warns about special purpose vehicles (SPVs). This is a structure that allows startup investors to sell access to chunks of other stocks. However, new investors are not actually buying stocks at startups. They buy shares in SPVs, and in many cases the prices are incredibly bulging. This means that startup valuations need to soar for some shareholders of SPV to be evenly aligned.
SPVs are becoming particularly common in AI investments, with some startups increasing their astronomical sums. In the SEC filing search, at least nine SPVs have been linked to humanity since 2024 alone. The company is reportedly in talks to raise another $3.5 billion.
The attempt to raise $1.5 billion in numerical AI is reportedly filled with SPVs, according to information. Note that neither company is in Sequoia's portfolio.
This trend is not limited to just a few companies. Almost every major billions of AI companies have investors who provide SPVs. And if a well-known VC company (for example, Sequoia's convention Andreessen Horowitz, leads the contract, only that name could be seduced by the buyer.
One person involved in the Senderly market explained the transaction, which includes SPVs: “They are giving hats to all transactions that they can't find enough VC investors, and the company in the name puts a small amount. These stupid family offices say Andreessen must be leading it.
Bosa's message to these investors? “Don't buy it.”
Sequoia did not immediately respond to requests for further comment.