?? Sequoia’s India mafia

Venture-capital heavyweight Sequoia’s foray into India has been punctuated by sudden transitions and upheaval. And it has unwittingly served as the diving board for other VC firms.?

Sequoia entered the country by acqui-hiring the team of Indian VC fund WestBridge Capital in 2006. Five years later, the top four partners at Sequoia’s India unit quit and revived WestBridge with a focus on investing in publicly listed, traditional companies.

The approach differed from Sequoia’s DNA of backing tech and software companies, although back then, its India portfolio and those of firms like Matrix, Nexus and Helion comprised largely non-tech bets.?

The four partners’ exit signalled that tech startups were not yet a lucrative opportunity in India. (Ecommerce and software had just begun to emerge.)

Following the restart in 2011, WestBridge began a $500-million fund. Today, the firm run by Sandeep Singhal and Sumir Chadha has $7.5 billion of assets under management.

Its portfolio has expanded beyond the public markets: most of its deals in the past three to four years have been startups like PhysicsWallah and Lead School. Its largest public-market bets in recent years include SaaS players Zscaler and Freshworks.

In 2018, Sequoia India had just begun to pay more attention to pure-play consumer-internet and software startups when three more partners — Abhay Pandey , VT Bharadwaj and Gautam Mago — left to establish A91 Partners .

A91 built a niche by supplying growth capital to companies with proven unit economics, high-touch offline distribution and a tech layer for greater efficiency. A91, which manages $900 million across two funds, has seen success with consumer brands like Sugar and Atomberg, besides fintech Digit.?

2023 marks the most significant rejig in the history of Sequoia’s India unit. On Tuesday, June 6, the arm split from the US parent and rebranded itself as Peak XV Partners . It manages $9.2 billion.

Many investors see the separation as a negative vote on the venture opportunity in India. It’s true that all VCs, whether they are local or global, will face this question from investors when they raise money for their next funds.

There’s another way to look at the developments in the VC world: Sequoia alumni now have over $18 billion in India-focused capital. That’s 5X the total VC funding raised so far in 2023 ($3.3 billion). All three firms have found their product-market fit with different types of entrepreneurs, though there are occasional overlaps.

As for the Indian venture opportunity, I believe it will disappoint both the overly enthusiastic and the cynical.

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• Info Edge finalised the deal to invest in Rahul Yadav’s proptech venture, Broker Network?(4B Networks), in February 2021. Its capital pool was expected to swell with Zomato’s IPO, so it wanted to move aggressively and win deals in a frenzied private market.
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• Yadav and Info Edge’s relationship became strained after he refused to share financial reports, even though Broker Network was now a subsidiary of the publicly listed group, and tried to raise debt financing.
• Read the deeply reported, two-part series.

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