In an unexpected turn of events, global venture capital (VC) giant Sequoia Capital decided to split into three separate entities. Each of the firm’s divisions—Sequoia Capital (US/Europe), Sequoia China, and Sequoia India & Southeast Asia—will now function autonomously under its own name. As a result of this change, Sequoia India & Southeast Asia, led by 47-year-old Shailendra Singh, will now be known as Peak XV Partners.
Sequoia Capital Managing Partner Roelof Botha says Peak XV Partners would benefit from greater autonomy to further solidify its position as a market leader. “Sequoia India has been instrumental in developing the start-up ecosystem in the country, which has now become one of the most vibrant in the world. I am very excited for Shailendra and the Peak XV team as they continue to double down on the region,” he said in a statement to BT.
Peak XV is no toddler, mind it. It stands to inherit a significant war chest. This money comes from the $2.85 billion Sequoia raised last June to fund its investments in Indian and Southeast Asian start-ups, much of which remains unutilised. It’s a sizeable arsenal considering the current funding winter.
That’s perhaps why the founder and VC ecosystem has hailed the “independence” of the regional fund, seen as validation of the Indian opportunity, and a demonstration of the faith in the quality of founders. The firm manages over $9.2 billion across 13 funds. “Peak XV Partners in India has a historic opportunity: India is where China was in 2008-09 in terms of economic indicators. While the first 17 years for Sequoia have been about foundation building, the next 17 years as Peak XV Partners could be truly wealth-creating,” says Rajesh Sawhney, Founder and CEO of GSF India, a start-up accelerator and angel investment firm.
But what was the reason for the split? The disparity in returns between Sequoia’s India and Southeast Asia funds and its US funds appears to be the primary factor behind the decision to hive off the Indian business, says Sawhney. “The Indian firm has the smallest AUM (assets under management) of the three entities, and it has not delivered returns comparable to those in the US and China for limited partners (LPs),” he adds.
However, Sequoia’s departure from India has baffled many, especially in light of the country’s enormous digital potential. From an operational perspective, however, the parent group’s exit is not entirely surprising due to portfolio challenges and subpar performance compared to other regions. “The local arm’s performance was a key reason for taking this massive call, given that they (Sequoia) kept the Europe team. With all those regulatory and governance issues [in India], it
could be possible that the US team would have thought the portfolio is not well-managed and it is a high-maintenance endeavour,” says a senior VC investor in India.
While the split is expected to help level the playing field for Indian VCs, allowing local funds to better attract home-grown talent in the absence of Sequoia’s legacy appeal to Indian entrepreneurs, the biggest challenge for Peak XV Partners now lies in fundraising, as its track record in comparison to the US and China has not been as strong, says another veteran VC in India.
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