US-headquartered VC firm Sequoia Capital is reportedly slashing the size of its new India fund by 25%. This comes at a time when investors are taking a guarded approach towards the country’s burgeoning early-stage tech ecosystem.
With names like Zomato, OYO Rooms, Ola, Grofers and BJYU’s among its portfolio companies, Sequoia Capital is looking to raise $650 Mn-$700 Mn for its sixth India Fund.
Earlier, in January 2018, sources close to the development revealed that the VC firm was set to raise up to $1 Bn for India Fund VI, making it the firm’s largest India focussed fund raised ever.
As per the reports that surfaced at the time, the corpus would be raised across multiple vehicles such as for venture capital focused on technology companies as well as growth-stage capital focused on consumer and other non-tech investments.
It could also have two separate investment committees for each fund, people familiar with the development stated. A portion of the new fund will also be used for investments in Southeast Asia-based startups that are being led by Managing Director Shailendra Singh.
Sequoia Capital’s local team which also leads investments in Southeast Asia, has set up an office in Singapore. Thus the Southeast region will be a significant part of the strategy in the upcoming fund for Sequoia Capital India, which currently manages about $3.2 Bn of investments.
The plans for the new India Fund has come two years after the Silicon-based VC firm raised $930 Mn in February 2016 for its previous India-focused fund. Back then, it was identified as the biggest fundraise by any VC fund for India-specific investments. With the fundraise, the venture fund’s asset value also increased to more than $3 Bn at that time.
According to a report by ET, for growth-stage investments with large ticket sizes, Sequoia might utilise its global growth fund, with a corpus of $6 Bn-$7 Bn.
Commenting on the firm’s decision to slash the size of its new India Fund, one person in the know said, “Smaller-sized funds in the $150 Mn-$300 Mn range seem the most appropriate for India right now. Billion-dollar exits for VCs are still based on paper valuations. It is clear that the scope and opportunity of the Internet space was overestimated in 2014-15.”
Apart from the US, India and Southeast Asia, China remains another attractive destination for Sequoia Capital, with significant opportunities. Here, the VC firm operates an independent fund. Earlier, in 2016, it also shut down its Israel-focussed fund, merging it with the US counterpart.
A Rundown Of The Major India Bets Of Sequoia
Sequoia started operations in India in 2006. Till date, it has invested in over 100 companies across sectors such as, healthcare, consumer and financial services. Some of its well-known bets in India include Zomato, data sciences firm Mu Sigma, Grofers, cab aggregator Ola, and edtech startup Byju’s.
The VC firm debuted 2017 with Bengaluru-based online healthcare platform Practo that raised $55 Mn Series D funding in a round led by Tencent. This was followed by Urban Ladder funding in February 2017.
In the same month, collaborative coworking space provider Awfis raised $20 Mn from Sequoia India. Later the same month Gurugram-based travel search marketplace ixigo secured $15 Mn in its Series B round of funding led by Sequoia Capital.
In April 2017, the VC firm concluded a $180 Mn secondary stake sale of eight of its portfolio companies to Madison Capital. The report further added that Sequoia divested small stakes in Pine Labs, Star Health, and India Shelter Finance Corporation, along with 1.5% ownership in Snapdeal.
It also fully exited from its investment in Micromax and legal process outsourcing firm UnitedLex. Meanwhile some of its investments in a bunch of hyperlocal companies including TinyOwl, RoadRunnr and Tapzo did not work out well.
Also, Sequoia Capital raised $4 Bn funding last year, as per the latest SEC filings. The funds were to be deployed for infusing capital into various funds. Apart from this, the filings also revealed that the second growth fund – Sequoia Capital Global Growth Fund II, L.P. has received about $2 Bn.
A filing for Sequoia’s China Growth Fund IV, revealed that Sequoia has raised about $900 Mn to invest in startups in the Chinese market. Along with this, the filings for Sequoia Capital India reveal that the VC firm has raised about $700 Mn for the Indian market.
Apart from Sequoia, other venture capital firms operating in India include homegrown Nexus Venture Partners, Accel Partners, Blume Ventures, Matrix Partners, Kalaari Capital and Lightspeed Venture Partners, among others.
Recently, reports surfaced that Kalaari Capital, which was one of the early investors in Snapdeal, was looking to sell its stake in the ecommerce firm. As per sources, the venture capital firm has already held conversations with the company’s promoters to sell its stake, in entirety or partially. However, there is yet no guarantee that a successful secondary deal will necessarily happen.