Sequoia Capital is reportedly joining a blockbuster funding round for Entropic, the AI ​​startup behind Cloud. According to the Financial Times. It’s a move that’s sure to turn heads in Silicon Valley.

Why? Because venture capital firms have historically avoided backing competing companies in the same sector, preferring to place their bets on a single winner. Yet Sequoia, having already invested in both Openei and Elon Musk’s Zai, is now throwing its weight behind Anthropic as well.

This time is especially surprising because of what Openei CEO Sam Altman said under oath last year. As part of Openee’s defense against Musk’s lawsuit, Altman addressed rumors about restrictions on Openee’s 2024 funding round. While he denied that OpenAI’s investors were prohibited from supporting competitors at large, he acknowledged that investors with ongoing access to OpenAI’s confidential information were told “that access would be terminated if they made non-disappointing investments in OpenAI’s competitors.” Altman called this “industry standard” protection (which it is) against the misuse of competitively sensitive information.

According to the FT, Sequoia is joining a funding round led by Singapore’s GIC and US investor Coto, with a stake of $1.5 billion each. Anthropic aims to raise $25 billion or more at a valuation of $350 billion — more than double its $170 billion valuation from just four months ago. The WSJ and Bloomberg previously reported the round at $10 billion. Microsoft and NVIDIA have pledged up to $15 billion combined, with VCS and other investors said to be contributing $10 billion or more.

Sequoia’s connection to Altman runs deep. When Altman left Stanford to start Loup, Sequoia backed him. He later became a “scout” for Sequoia, introducing the firm to Pitti, which became one of the firm’s most valuable portfolio companies. Sequoia’s new co-leader Alfred Lin and Altman also appear relatively close. Lin has interviewed Altman several times at Sequoia events, and when Altman was briefly ousted from OpenAI in November 2023, Lin publicly said he would eagerly support Altman’s “next world-changing company.”

Although Sequoia’s investment in Xi already defies the traditional VC approach of picking winners, the bet is widely seen as less about backing an OpenAI rival and more about deepening the firm’s extensive relationship with Elon Musk. Sequoia invested in X when Musk bought and rebranded Twitter, is an investor in SpaceX and the Boring Company, and is a major backer of Musk’s brain-computer interface company, Neuralink. Former longtime Sequoia leader Michael Moretz was also an early investor in Musk’s X.com, which became part of PayPal.

Sequoia’s apparent reversal of portfolio conflicts is particularly evident given its historical standing. As we reported in 2020, the firm took the unusual step of walking away from its investment in payments company Finix after it determined it was starting to compete with Stripe. Sequoia forfeited its $21 million investment, allowing Finks to keep the money while giving up its board seat, information rights and shares, marking the first time in the firm’s history that it had severed ties with a newly funded company over a conflict of interest. (Sequoia led Finks’ $35 million Series B round just months ago.)

The reported Anthropic investment comes after dramatic leadership changes at Sequoia, where the firm’s global steward, Rolof Botha, was stepped aside in a surprise vote this fall. After sitting days With that editor at TechCrunch, Lynn and Pat Grady — who led that Phoenix deal — took over.

Anthropic is reportedly preparing for an IPO that could come as soon as this year. We have reached out to Sequoia Capital for comment.