Will other VC funds follow Sequoia’s geographical split strategy?
One of the most discussed news from the startup ecosystem has been the geographical split of Sequoia in three entities.
Sequoia Capital, founded in 1972, is one of the most prominent private equity and venture capital firms in the world. Focusing predominantly on technology and innovation, Sequoia औ Capital is a stage agnostic investor that has funded and supported over 1500 companies worldwide.
On June 6, Sequoia announced a split which created three units — Sequoia Capital US and Europe under Roelof Botha; the India and Southeast Asia firm, which has been rebranded as Peak XV Partners, under Shailendra Singh; and the China firm, now called HongShan, under Neil Shen. The profit-sharing agreement between the VC firms would be dissolved which meant the entire sum would now go to the revamped Peak XV team, in the case of India.
Opinion has been divided on the probable reasons for the split. The officially stated reason has been to avoid the potential portfolio conflicts, and operational hassles, across the three major geographies. Shailendra Signh, explaining the strategy behind the move, opined
My team and I believe that we will have parallel ecosystems of software companies, development tools companies, infrastructure, and cloud computing, all built by Indian brands. And that’s our biggest common brand conflict. If it was one or two deals a year, we could deal with the conflict. But if this conflict is a weekly issue for us. It’s a big issue.
Peak XV partners are now hopeful of greater agility and complete freedom in making Indian and global investments. For example, by eliminating centralized legal and compliance functions, Peak XV partners can make decisions on the basis of our nuanced understanding of local regulations, rather than be constrained by regulations that may have no bearing in our region.
On the other hand, a section of VCs was circumspect about the Sequoia split. According to them, delinking China might make sense, but not India. According to them, Sequoia India’s less optimal performance and recent controversies related to management control at a couple of their unicorn portfolio companies, might have led to the move. It is true that the average returns for global VC funds in India has been lower as compared to other major geographies.
It would be interesting to see if the investment thesis of the new entity is radically different from its former self. Peak XV, which will continue deploying its latest $2.85 billion fund, currently manages $9 billion worth of assets in the India and Southeast Asia region. More than 50 companies in its portfolio are valued at $1 billion or more.
As we have argued multiple times in this newsletter, the era of easy money is long dead. Investors and funds, big or small, are likely to graduate towards lesser deals but with far greater due diligence.
At Ecosystem Ventures, we have never played along the common VC investment thesis, wherein, exceptional returns of one of the portfolio companies, subsidize exceptional losses of the rest.
None of the eighteen of our past investments has been written off since we are highly selective in sourcing startups and pride ourselves on our investor risk mitigation strategy. We are in for the long game and sustained results.
Ecosystem Ventures This Week
We are thrilled to share that Ecosystem Ventures hosted the 4th pitch event of 2023 this week, where one of our portfolio startups pitched to angel investors, who joined either remotely or graced our office with their presence.
To view our active deals visit here.
Startup Funding Summary
Indifi Technologies, Gurgaon-based lending platform, has raised $35 Mn in Series E funding from ICICI Venture, British International Investment, OP Finnfund Global Impact Fund I, Omidyar Network India, Flourish Ventures and CX Partners – Read More
AVIOM India Housing Finance, Delhi-based housing finance company, has raised $30 Mn in Series D funding from Nuveen – Read More
Everest Fleet, Mumbai-based fleet management startup, has raised $20 Mn in a funding from Uber – Read More
HomeLane, Bengaluru-based home interiors brand, has raised $9 Mn in a funding from existing investors – Read More
BASIC Home Loan, Gurgaon-based fintech startup, has raised $5 Mn in Pre-series B funding from Ashish Kacholia, Gruhas, Venture Catalysts, Dexter Angels, IIM Indore Alumni Angel Fund and CommsCredible Venture Fund – Read More
M&A Snippets
Ahmedabad-based pathology-focused diagnostic lab chain Sterling Accuris Wellness has acquired Ahmedabad-based pathology service provider VIP Labs for an undisclosed amount – Read More
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