Venture Capital Veteran Warns of New ‘Greed Cycle’ Fueled by AI Investment

Roelof Botha, a managing partner at Sequoia, cautions against the resurgence of special purpose vehicles (SPVs) in venture capital, particularly within the AI sector, highlighting the risks for less elegant investors.

the SPV Comeback: A Recipe for Disaster?

A prominent venture capitalist is sounding the alarm about a potential “greed cycle” brewing in the tech investment landscape. Roelof Botha, a managing partner at Sequoia, recently took to social media to express his concerns about the resurgence of special purpose vehicles (spvs), especially within the booming artificial intelligence (AI) sector.

Botha’s concerns are rooted in the structure of SPVs. 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.”

SPVs Explained: A Risky Investment Vehicle

SPVs are designed to allow early investors in a startup to sell portions of their shares to other investors. Though, the new investors aren’t directly buying shares in the startup itself. Instead, they are buying shares of the SPV, often at premiums that require important future valuation growth just to break even. This structure concentrates risk on the SPV investors,who may be less experienced in the venture capital arena.

AI Investment Fuels SPV Growth

the AI sector is witnessing a surge in SPV usage, with companies raising significant capital through this mechanism. A search of SEC filings reveals at least nine SPVs linked to Anthropic since 2024. Anthropic is reportedly seeking to raise another $3.5 billion. Figure AI’s attempt to raise $1.5 billion is also reportedly full of spvs.

the trend extends beyond a few isolated cases. “Nearly every major multi-billion AI company has investors offering spvs.” The allure of a well-known VC firm leading the deal, even with a minimal investment, can attract eager buyers. As one person involved in the secondaries markets describes SPV-laden deals: “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.”

Echoes of the Past: Lessons Unlearned?

The increasing popularity of SPVs raises concerns about a repeat of past mistakes. The venture capital market experienced a significant downturn in 2022, following an overheated period in 2021. The repercussions continue to be felt, with 2025 projected to be “another brutal year of failed startups.”

A Word of Caution

Botha’s message to potential SPV investors is clear: “Don’t buy it.” This warning underscores the importance of due diligence and a thorough understanding of the risks associated with SPVs, particularly in the rapidly evolving and frequently enough overhyped AI sector. Investors should carefully evaluate the underlying startup’s fundamentals and the terms of the SPV before committing capital.

Navigating the Venture Capital Landscape

The venture capital landscape is fraught with opportunities and risks. As 2025 unfolds, exercising caution and conducting thorough research is essential. before committing to any investment, especially those involving complex structures like SPVs, secure advice from independent financial professionals.