Sequoia Limited Partners, a veteran in the Indian startup ecosystem, has announced two new funds for India/SE Asia, with a combined value of a staggering $1.35 billion. The amount has been divided into two different funds: a $525 million venture fund and a $825M growth fund.
The first rumours of this investment started a few days back, when VCCircle reported regulatory findings that hinted at a $1.25 billion investment being raised by Sequoia for the Indian market. However, Sequoia has finally decided to speak out and announced the existence of two funds, today.
Shailendra J Singh, Managing Director at Sequoia Capital, India, wrote in a LinkedIn post, “We are deeply grateful to Sequoia’s Limited Partners, who have collectively committed $1.35B to two new Sequoia India funds: a $525M venture fund and a $825M growth fund. Sequoia India now operates seed, venture and growth funds, a structure that allows Sequoia to remain a relevant partner for founders at all stages of their journey. The three Sequoia India funds will continue to invest across India and SEA.”
Sequoia has been among the oldest and one of the most successful venture capital firms within India. While the firm’s startup investments are well known, with the likes of Oyo, Byju’s, Ola Cabs among others in its portfolio, Sequoia has been equally active on the non-startup scene. Some of the big bets it placed early on in India include Cafe Coffee Day, Star Health etc. with the likes of Micromax, Hector Beverages among others as its recent non-startup bets.
While Sequoia has largely been associated with late/growth stage capital, the firm recently ventured into early-stage investing as well, with its accelerator program ‘Surge’. The third cohort of its India-based accelerator program, with a group of 15 startups kicked off recently, albeit virtual only. Surge is a “rapid scale-up” program by Sequoia, wherein the VC firm combines $1 million to $2 million of seed capital with company-building workshops, global immersion trips and support from a community of “exceptional founders”.
Singh suggests that the job is far from over, and the real work is just beginning. He said that raising funds is not an indicator of success, and these investments make the firm liable to deliver attractive returns to Sequoia’s Limited Partners. “We do this by partnering with outstanding founders who are building category defining companies” Shailendra added.
The new funds come at a time when fundraising is a serious and almost threatening challenge, specially for startups, most of whom survive largely on external capital. The market is cut throat competitive, with most companies are facing heavy losses despite growing revenues every year. Singh adds, “The startup ecosystem in India and SEA has had a tumultuous journey over the last decade. During periods of exuberance, investors have rushed in to invest large amounts of capital into startups. This has, expectedly, resulted in short term over-funding and hyper competition amongst start-ups. These periods have been followed by down cycles, cost cutting and negative sentiment. These cycles have enhanced startup mortality and left many founders, investors and startup employees scarred. ”
This, has caused intense competition in the market, which has forced companies to cut margins and keep investing to keep food on their table.
Despite the success it has had within India, Sequoia has had its own share of not-so-well performing bets. Back in 2015, Sequoia invested in Housing, a fundraising round that came during those “over-funding” years that Singh talks about in his LinkedIn post. Then there’s Oyo, which seems to sink deeper into muddy waters by the day. Digital payments company Freecharge, though acquired, turned out to be a loss for the firm. The company will of course make use of those learnings while making future bets.
Having said that, things are perhaps the most bright and shiny, at least for consumer internet companies, in this part of the world.
India and South East Asia combined are expected to cross $14T in GDP and the number of mobile internet users will likely cross 1.5 billion by 2030. Thus, technology will be a big driving point in the next decade. Sequoia’s future bets would surely be made keeping that and fundamental business models in mind.
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