Peak XV Pares Size Of Its Largest Fund By 16%, Slashes Fees

Venture capital firm Peak XV Partners, formerly Sequoia Capital India, has pared the size of its $2.85 Bn fund by 16% or $465 Mn more than a year after it split from Silicon Valley-based Sequoia Capital.

“In the context of a richly priced public market in India, we are investing in a measured manner in our growth fund, while we continue to lean in on seed and venture stage opportunities. As a result, we have made the decision to re-size our 2022 vintage funds by 16%,” Peak XV said in a statement.

Peak XV Partners has opted to tie a portion of its carried interest to profit distributions in its growth and multi-stage funds, while keeping the economics of its seed and venture funds unchanged.

Despite going against current market optimism, the VC firm believes this approach will benefit both founders and limited partners (LPs) in the long run. The decision has been positively received, as highlighted in feedback from a large non-profit LP, it added.

“Our conviction about investing in India & South East Asia has never been stronger. We are on track to have our second best year for distributions and exits in our history thanks to strong portfolio performance,” the VC firm also said.

In addition to reducing the size of its fund, Peak XV is also lowering the management fees it charges LPs from 2.5% to 2%, an ET report added.

The firm is also cutting its carry—the profits it earns from exits—on growth investments from 30% to 20%. However, if a fund in the growth or multi-stage category reaches a 3X distribution to paid-in (DPI) capital, the carry will revert back to 30%. DPI measures the total capital returned to the fund’s LPs or sponsors.

Peak XV Partners also reportedly realised exits worth nearly $1.2 Bn in the 15 months since its separation from parent Sequoia last year. The VC major sold stakes in “nearly a dozen” listed portfolio companies in the past year, including foodtech major Zomato, D2C unicorn Mamaearth and caller identification platform Truecaller.

The VC firm also offloaded stakes in startups such as edtech platform K12 Techno, digital entertainment startup Pocket Aces and cybersecurity startup PingSafe via secondary transactions and mergers and acquisitions (M&As).

Since entering India in 2006 through the acquisition of WestBridge Capital’s team, Sequoia India quickly established itself as a leading investor in the country’s startup ecosystem, backing prominent unicorns like CRED, Meesho, Groww, Mamaearth, and Unacademy. However, last year, Sequoia Capital underwent a split, dividing into three independent entities.

The India and South Asia operations were rebranded as Peak XV Partners, while the China business took on the name HongShan.