Vamsi Bedapudi

When Starcloud, a space data center startup, announced in March that it had raised $170 million at a $1.1 billion valuation led by Benchmark and EQT, you had to read deeply into the press release to learn that the deal was done in two tranches, with the first part led solely by Benchmark. What it didn’t say: that first piece came at a valuation of $250 million, according to two sources familiar with the deal. Just days later, the second tranche, which also included a host of smaller investors, closed at more than four times the price. The Starcloud deal is an example of what investors say is becoming a common practice: prestige firms getting a significantly better price than other investors in what is essentially the same round. Proponents of such deals say they’re simply reflecting the market reality that some investor dollars are greener than others and it’s only logical for firms to cash in on that — especially in early-stage deals where an investor’s brand name can make a huge difference. But critics say such structures can be problematic, not least for employees. Brendan Foody, CEO of the AI-training startup Mercor, stirred the pot on the issue on X last month, writing: “in the last 6 mo’s ive seen a half dozen rounds where sequoia invests in 2 tranches. everyone pretends they only did the higher valuation,” and calling the tactic “deceptive.” Sequoia partner Shaun Maguire, in a reply, claimed the practice was rare. But Newcomer’s reporting suggests it’s increasingly common across the industry. @followthemani