Whop's Sequoia-Led Funding Pushes Its Value to $5.1 Billion

“Rule one of making money is go where they ain’t.” That’s how famed investor Doug Leone, who used to run venture firm Sequoia Capital, described his first deal at the firm since returning to an active investing role earlier this year.

Sequoia is leading a funding round for Whop, a Palo Alto-based startup that helps people start, run and scale their own businesses. The startup has raised $205 million at a $5.1 billion valuation, including the investment, it plans to announce on Wednesday. The other investor in the round is e-commerce company Shopify Inc., according to Whop.

As part of the deal, Leone, who’s backed companies including cloud security firm Wiz Inc. and fintech giant Nu Holdings Ltd., is joining Whop’s board of directors. He says he chose to invest in the company because it’s found a way to attract young people to its platform, the startup is expanding the business and, most importantly, it’s sitting outside of the obvious artificial intelligence zeitgeist.

“If there’s 50 venture firms chasing 12 Whops, it’s not so good. Right now, everybody is chasing model companies,” Leone said.

Other early investors in Whop include Peter Thiel; A-Star Capital, which styles itself as A*; Insight Partners and Bain Capital Ventures.

Whop was started in 2021 by founders who met as teenagers and connected over building software to track sneaker drops. The trio’s business helps young people tap into their entrepreneurial spirit and run “hyper-niche” businesses that range from services to e-commerce and more, explained Steven Schwartz, a co-founder and the CEO of Whop.

Active businesses on Whop run the gamut: there’s an emergency tree removal service in Canada, curation services for music playlists and even mobile apps for private jet chartering.

Sequoia Capital had passed on investing in Whop earlier. This time, Leone said, the company showed that the businesses on its platform weren’t churning — in fact, they were growing and diverse in focus.

The investor also liked one of Whop’s customer acquisition strategies: hosting “Whopathons” at elite universities across the US, which nudged students to start businesses on the website over 48-hour periods.

Whop recently passed $400 million in annualized run rate revenue, up from $60 million at the beginning of last year. The bulk of the company’s revenue comes from taking a percentage of any transaction that its business owners process. The blended average of their fees is 6%, said Schwartz.

Whop also recently introduced its own AI models to suggest business decisions for owners on its platform, such as proposing advertisements to target a specific customer group or recommending the most effective times to drop a discount code. Whop collects a small fee if users opt to use its AI models.

The startup’s challenge will be making sure its software services stay relevant — and worth paying for — in the age of AI. For example, it’s getting easier to use AI to “vibe code” businesses, so people could turn to alternative business software startups, or consumers could get overwhelmed by too many options.

Leone, for his part, said that competition from other startups isn’t an issue. “I don’t remember the last time that I invested in a company that had patents to defend it,” Leone said. “The defensibility in our crazy world that we live in is speed — give me a 90 day advantage.”

Schwartz said that the company’s offerings, which include “everything from business creation, payment acceptance, advertisements, card issuance, and images and graphics,” will help it avoid getting boxed out.

With the new money, Whop, currently a 110-person startup, will look to grow its team and open offices in Colombia and around Europe. This year, the company launched its first office on the West Coast, based in Palo Alto, California, shifting from its original Brooklyn, New York-based headquarters.