Top Silicon Valley investor Sequoia Capital has committed $1.35 billion to two new India and Southeast Asia-focused funds, which will zero in on investing in startups.
It is the largest corpus earmarked by the venture capital (VC) firm for the region. The funds will be raised under Sequoia Capital India.
The company has received commitments for a $525 million venture fund and $825 million growth fund, Sequoia India Managing Director Shailendra Singh said in a LinkedIn post. The investment commitment comes at a time when COVID-19 pandemic has affected businesses and economies across the world, startups and MSMEs in particular.
The $525 million venture fund will target early stage startups, while the $825 million growth fund will invest in growth stage startups. This is the first time that Sequoia Capital has raised two distinct funds for growth and venture investments.
Sequoia India will now operate seed, venture, and growth funds, as these asset classes allow it to stay relevant for founders at all phases of their journey.
"We are excited about the depth of opportunities in this region, which is undergoing a massive technology-led transformation," said Singh in his LinkedIn post. He further stated that the "the start-up ecosystem in both India and Southeast Asia has come a very long way in the last few years; the market gets deeper and the crop of founders, and their achievements, becomes more impressive each year."
Singh added that the combined GDP (Gross Domestic Product) of India and Southeast Asia is expected to surpass $14 trillion and the number of mobile internet users exceed 1.5 billion by 2030. He highlighted how the region will become home to several tech giants over the next decade.
Singh also expressed that fundraising is a huge responsibility to deliver attractive returns to Sequoia's partners, with many of them being charities, non-profits, and foundations. However, companies in India and Southeast Asia are faced with a difficult, high-friction environment in which they have to develop and shape themselves.
He further underlined that the "startup ecosystem in India and SEA has had a tumultuous journey over the last decade. During periods of exuberance, investors have rushed in to invest large amounts of capital into startups. This has, expectedly, resulted in short term over-funding and hyper-competition amongst start-ups. These periods have been followed by down cycles, cost cutting and negative sentiment. These cycles have enhanced startup mortality and left many founders, investors and startup employees scarred."
Albeit, other challenges, Singh believes that startups in India don't have a regulatory framework that allows them to get listed on foreign exchanges such as Nasdaq. Meanwhile, in the current scenario, several startups have chosen to remain private, and raising capital in this market context has become a proxy for success.
"Our markets are deepening, our founders are world-class, our tech talent is formidable - but we need to hold ourselves to a higher bar. It's time to aspire for massively large and profitable companies," Singh exclaimed.
"It's time to build more products that can compete globally on quality, not just on price. We need more unique and innovative startups, pursuing original ideas in addition to "X of Y" business models. We need more examples of authentic leadership, improvements in gender diversity, and inclusive, safe, and nurturing work culture for our teams," he added.