?? Sequoia’s ripple effect

Nearly two weeks after the news, Sequoia India’s separation from its Silicon Valley parent continues to stir the tech land.

The conversations have shifted from a customary talk about practical details to worry-laden questions of what the development says about venture capital’s prospects in India. This is also influencing the discussions limited partners, or investors in funds, have with VC fund managers.?

“Until now, the concerns were around how portfolio companies were doing. Over the past week, broader questions have emerged about if this is the right time to invest in an India-focused venture fund,” said a general partner at an early-stage VC firm, currently on the road to raise its second fund.?

With assets under management of $9.2 billion, Sequoia has had a massive footprint in India’s startup ecosystem. It is 4 times larger than the firms ranked immediately after it, Accel India and Elevation Capital .

As Peak XV Partners XV, the unit has $2.5 billion of dry powder. That’s more than what Tiger Global has managed to raise for its latest fund.?

The anxiety over the venture-capital opportunity in India — whether there will be a pot of gold at the end of the mine — has never been this high in recent years. Bejul Somaia , who heads Silicon Valley firm Lightspeed ’s India office, felt compelled to tweet a note defending the market.

Somaia shared Lightspeed’s track record in the country to buttress the point: $1.6 billion invested, $1 billion in cash exits, and $3.4 billion in existing portfolio valuation.

Despite the global funding squeeze, VC players like Z47 and Nexus Venture Partners have assembled record-sized India funds this year. In contrast, global growth-stage investors like Tiger, Insight Partners and Technology Crossover Ventures, all of which were active in India in 2021, have struggled to raise money.

All told, VC funds currently seeking capital will have to articulate why investing in Indian startups remains an attractive option.

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Sequoia India’s last fundraise was independent, says Shailendra Singh

Arc Notes

• VC firm Peak XV, formerly called Sequoia Capital India, has built a direct relationship with limited partners, says managing director Shailendra J Singh Singh. His comments come amid questions about whether Peak XV can maintain momentum without the Sequoia brand.
• The firm’s last fundraising event, held in 2022, was separate from the efforts of the US and China arms, giving LPs the world over the option to independently choose Indian funds.?
• Over the next few weeks, Peak XV’s team will meet LPs to inform them about the changes at the firm.?
• About $2.5 billion is still available for investments. The firm may seek fresh capital only after two to three years as the pace of dealmaking has slowed down in the startup world.?

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