After a quarter century defending digital rights, Cindy Cohn announced on Tuesday that she is stepping down as executive director of the Electronic Frontier Foundation. Cohn, who has led the San Francisco–based nonprofit since 2015, says she will leave the role later this year, concluding a chapter that helped define the modern fight over online freedom.
Cohn first rose to prominence as lead counsel in Bernstein v. Department of Justice, the 1990s case that overturned federal restrictions on publishing encryption code. As EFF’s legal director and later executive director, she guided the group through legal challenges to government surveillance, reforms to computer crime laws, and efforts to hold corporations accountable for data collection. Over the past decade, EFF has expanded its influence, becoming a central force in shaping the debate over privacy, security, and digital freedom.
In an interview with WIRED, Cohn reflected on EFF’s foundational encryption victories, its unfinished battles against National Security Agency (NSA) surveillance, and the organization’s work protecting independent security researchers. She spoke about the shifting balance of power between corporations and governments, the push for stronger state-level privacy laws, and the growing risks posed by artificial intelligence.
Though stepping down from leadership, Cohn tells WIRED she plans to remain active in the fight against mass surveillance and government secrecy. Describing herself as “more of a warrior than a manager,” she says her intent is to return to frontline advocacy. She is also at work on a forthcoming book, Privacy’s Defender, due out next spring, which she hopes will inspire a new generation of digital rights advocates.
This interview has been edited for length and clarity.
WIRED: Tell us about the fights you won, and the ones that still feel unfinished after 25 years.
CINDY COHN: The early fight that we made to free up encryption from government regulation still stands out as setting the stage for a potentially secure internet. We’re still working on turning that promise into a reality, but we’re in such a different place than we would’ve been in had we lost that fight. Encryption protects anybody who buys anything online, anyone who uses Signal to be a whistleblower or journalists, or just regular people who want privacy and use WhatsApp or Signal. Even the backend-certificate authorities provided by Let’s Encrypt—that make sure that when you think you’re going to your bank, you’re actually going to your bank website—are all made possible because of encryption. These are all things that would’ve been at risk if we hadn’t won that fight. I think that win was foundational, even though the fights aren’t over.
The fights that we’ve had around the NSA and national security, those are still works in progress. We were not successful with our big challenge to the NSA spying in Jewel v. NSA, although over the long arc of that case and the accompanying legislative fights, we managed to claw back quite a bit of what the NSA started doing after 9/11.
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![Mercor’s Brendan Foody calls out Sequoia over ‘dual-pricing’ valuation tricks | TechCrunch
In recent days, founders and founders-turned-investors took to X to share horror stories about being mistreated by VCs. Their complaints ranged from VCs falling asleep during pitch meetings to investors suggesting a founder fire a co-founder.
Brendan Foody, co-founder of the AI talent platform Mercor, which was last valued at billion, went so far as to call out Sequoia, arguably one of the most elite VC firms in the world.
“The “sequoia scam” is worse than a single horror story,” Foody wrote on X. “in the last 6 [months] ive seen a half dozen rounds where sequoia invests in 2 tranches. everyone pretends they only did the higher valuation. founders misrepresent this to their employees & then shop it to angels too.”
TechCrunch has previously reported on VCs investing in the same round at different valuations. Under this mechanism, the lead VC firm invests a significant chunk of its capital at a lower, preferential valuation, while putting a much smaller portion of capital in at a drastically higher price. The massive “headline” valuation that gets announced manufactures the perception of a dominant market winner, masking the fact that the lead investor’s actual average entry price was significantly lower.
The disparity can be stark. For example, when the AI-driven IT helpdesk startup Serval announced a million Series B at a billion valuation, the announcement didn’t tell the whole story. According to The Wall Street Journal, Sequoia’s actual lowest entry point valued the company at just 0 million — less than half the headline figure. The gap between those two numbers is the gap between perception and reality that Foody is pointing at.
Serval isn’t alone. At Aaru, a startup that uses AI to simulate user behavior for market research, lead investor Redpoint backed the company at a 0 million valuation despite an announced billion headline price.
Sequoia’s Shaun Maguire pushed back on Foody’s characterization directly. “TBH I have seen some of this behavior but I think it’s unfair to call it the ‘Sequoia scam,’” Maguire wrote in response to Foody on X. “This has happened approximately five times during my seven years at Sequoia. What happens is other investors are willing to pay a high price for a hot company — usually AI — at multiples above what we’re willing to pay. So we try to decouple the company-building relationship with our partner from the capital, and this leads to two tranches at different valuations in close succession.
“I’m not aware of anything shady here,” Maguire continued, “but if you’ve seen it I’d love to know. VC is a repeated game, so it just doesn’t make sense for us to try to mislead people. And if anyone has, I’d love to know. And in general, congrats on the success of Mercor — it was a miss for us.”
Maguire’s response frames the practice as a market reality rather than a deliberate maneuver — Sequoia, he suggests, is simply unwilling to pay what competitors will pay for the hottest deals, so it structures its participation differently. Whether that explanation fully holds up depends on a question Maguire doesn’t address: what founders are telling the people who don’t already know about the lower tranche.
Although Sequoia appears to use this pricing mechanism most frequently, Foody acknowledged it isn’t the only firm using this tactic. And while the dual-pricing structures certainly inflate a startup’s perceived worth and help attract top talent, calling the practice a “scam” may be going too far.
That’s because employee stock options should theoretically be priced based on the blended value of all tranches — not the headline number — according to Jason Woo, partner in valuation and financial modeling at Armanino, whose firm provides the independent 409A appraisals startups use to set option prices. A 409A is supposed to reflect a company’s fair market value, giving employees a strike price that’s insulated from whatever valuation gets announced in a press release.
There’s a catch: 409A valuations are widely understood to skew low. Because a lower strike price means a smaller tax bill for the company, there is a structural incentive to keep that number down. The appraisal that’s supposed to protect employees from an inflated headline valuation is also, by design, not trying particularly hard to reach the top of the range.
The angel question is more complicated. Unlike employees, angels are writing checks, not receiving options. There is no independent appraiser standing between an angel investor and whatever number a founder chooses to share.
The dual-pricing structure is just one of way VCs and founders game the perception of success in a hyper-competitive market. Another, more pervasive tactic involves manipulating or outright overstating annual recurring revenue (ARR).
The VC Niko Bonatsos, a longtime veteran of General Catalyst who more recently founded Verdict Capital, addressed this issue during one of TechCrunch’s events in Athens last month. “We [at Verdict] mostly invest before metrics, before product, before the company [has fully taken shape] but I do have a past portfolio, and sometimes the conversations are telling. I’ll get a call or an email with a very high ARR number. I’ll think: I didn’t remember that company doing so well. So I reach out to the founder: ‘What happened? Why are the numbers so strong?’ And the answer is: ‘Oh yeah, it’s 365 times the revenue we made yesterday because one of our campaigns hit.’ So yeah, some of these terms have lost meaning.”
Foody declined to comment further. Sequoia didn’t immediately respond to a request for comment.
— With additional reporting from Connie Loizos
When you purchase through links in our articles, we may earn a small commission. This doesn’t affect our editorial independence.#Mercors #Brendan #Foody #calls #Sequoia #dualpricing #valuation #tricks #TechCrunchMercor,Sequoia Partners,Valuations](https://i2.wp.com/techcrunch.com/wp-content/uploads/2024/11/GettyImages-1258486979.jpg?w=1024&ssl=1 "Mercor’s Brendan Foody calls out Sequoia over ‘dual-pricing’ valuation tricks | TechCrunch
In recent days, founders and founders-turned-investors took to X to share horror stories about being mistreated by VCs. Their complaints ranged from VCs falling asleep during pitch meetings to investors suggesting a founder fire a co-founder.
Brendan Foody, co-founder of the AI talent platform Mercor, which was last valued at billion, went so far as to call out Sequoia, arguably one of the most elite VC firms in the world.
“The “sequoia scam” is worse than a single horror story,” Foody wrote on X. “in the last 6 [months] ive seen a half dozen rounds where sequoia invests in 2 tranches. everyone pretends they only did the higher valuation. founders misrepresent this to their employees & then shop it to angels too.”
TechCrunch has previously reported on VCs investing in the same round at different valuations. Under this mechanism, the lead VC firm invests a significant chunk of its capital at a lower, preferential valuation, while putting a much smaller portion of capital in at a drastically higher price. The massive “headline” valuation that gets announced manufactures the perception of a dominant market winner, masking the fact that the lead investor’s actual average entry price was significantly lower.
The disparity can be stark. For example, when the AI-driven IT helpdesk startup Serval announced a million Series B at a billion valuation, the announcement didn’t tell the whole story. According to The Wall Street Journal, Sequoia’s actual lowest entry point valued the company at just 0 million — less than half the headline figure. The gap between those two numbers is the gap between perception and reality that Foody is pointing at.
Serval isn’t alone. At Aaru, a startup that uses AI to simulate user behavior for market research, lead investor Redpoint backed the company at a 0 million valuation despite an announced billion headline price.
Sequoia’s Shaun Maguire pushed back on Foody’s characterization directly. “TBH I have seen some of this behavior but I think it’s unfair to call it the ‘Sequoia scam,’” Maguire wrote in response to Foody on X. “This has happened approximately five times during my seven years at Sequoia. What happens is other investors are willing to pay a high price for a hot company — usually AI — at multiples above what we’re willing to pay. So we try to decouple the company-building relationship with our partner from the capital, and this leads to two tranches at different valuations in close succession.
“I’m not aware of anything shady here,” Maguire continued, “but if you’ve seen it I’d love to know. VC is a repeated game, so it just doesn’t make sense for us to try to mislead people. And if anyone has, I’d love to know. And in general, congrats on the success of Mercor — it was a miss for us.”
Maguire’s response frames the practice as a market reality rather than a deliberate maneuver — Sequoia, he suggests, is simply unwilling to pay what competitors will pay for the hottest deals, so it structures its participation differently. Whether that explanation fully holds up depends on a question Maguire doesn’t address: what founders are telling the people who don’t already know about the lower tranche.
Although Sequoia appears to use this pricing mechanism most frequently, Foody acknowledged it isn’t the only firm using this tactic. And while the dual-pricing structures certainly inflate a startup’s perceived worth and help attract top talent, calling the practice a “scam” may be going too far.
That’s because employee stock options should theoretically be priced based on the blended value of all tranches — not the headline number — according to Jason Woo, partner in valuation and financial modeling at Armanino, whose firm provides the independent 409A appraisals startups use to set option prices. A 409A is supposed to reflect a company’s fair market value, giving employees a strike price that’s insulated from whatever valuation gets announced in a press release.
There’s a catch: 409A valuations are widely understood to skew low. Because a lower strike price means a smaller tax bill for the company, there is a structural incentive to keep that number down. The appraisal that’s supposed to protect employees from an inflated headline valuation is also, by design, not trying particularly hard to reach the top of the range.
The angel question is more complicated. Unlike employees, angels are writing checks, not receiving options. There is no independent appraiser standing between an angel investor and whatever number a founder chooses to share.
The dual-pricing structure is just one of way VCs and founders game the perception of success in a hyper-competitive market. Another, more pervasive tactic involves manipulating or outright overstating annual recurring revenue (ARR).
The VC Niko Bonatsos, a longtime veteran of General Catalyst who more recently founded Verdict Capital, addressed this issue during one of TechCrunch’s events in Athens last month. “We [at Verdict] mostly invest before metrics, before product, before the company [has fully taken shape] but I do have a past portfolio, and sometimes the conversations are telling. I’ll get a call or an email with a very high ARR number. I’ll think: I didn’t remember that company doing so well. So I reach out to the founder: ‘What happened? Why are the numbers so strong?’ And the answer is: ‘Oh yeah, it’s 365 times the revenue we made yesterday because one of our campaigns hit.’ So yeah, some of these terms have lost meaning.”
Foody declined to comment further. Sequoia didn’t immediately respond to a request for comment.
— With additional reporting from Connie Loizos
When you purchase through links in our articles, we may earn a small commission. This doesn’t affect our editorial independence.#Mercors #Brendan #Foody #calls #Sequoia #dualpricing #valuation #tricks #TechCrunchMercor,Sequoia Partners,Valuations")
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