Sequoia raises $2.85bn for India, Southeast Asia investment

June 16, 2022 at 12:52 PM

Sequoia India and Sequoia Southeast Asia have raised $2.85 billion across a set of funds, including India venture and growth funds and an $850 million Southeast Asian fund, the venture capital fund’s first dedicated fund for Southeast Asia region.

Moneycontrol had reported in February that Sequoia Capital India had written to its US parent and investors to raise about $2.8 billion for Indian and Southeast Asian startups. This is the venture capital (VC) firm’s largest fund for the region and more than double its previous fund.

Sequoia has been one of India’s most aggressive VC investors. The company has backed about 30 unicorns in the country. Of the $2.85 that Sequoia has raised, the VC will be deploying $2 billion across Indian startups, which will be the largest-ever in VCs for India. The $2 billion corpus is nearly three times the size of funds raised by Accel and Elevation individually. Both the VCs had closed their largest-ever India funds earlier this year.

Elevation Capital, which has backed the likes of Swiggy, Meesho, Paytm and Unacademy, had a fund for Indian startups with a corpus of $670 million. Accel, meanwhile, had raised its $650 million in a fund dedicated for Indian startups in March.

Sequoia said that the fundraise signals the VC’s commitment to India and Southeast Asia as it comes at a time when markets have started to cool after a ‘very long bull run.’ This shows the faith our limited partners (LPs) have in the long-term growth story of India and Southeast Asia, the VC said.

Sequoia said India and Southeast Asia’s startup ecosystem has grown rapidly in the last decade, thanks to the acceleration of digital adoption and rising consumer incomes.

The VC firm said that it is betting big on the region as in 2021 India emerged as the third-largest startup ecosystem in the world, after the US and China, while Southeast Asia is on track to become a $1 trillion digital economy by 2030.  Sequoia said that many large companies with regional or global footprints will emerge from this region in the decade to come.

The startup and venture capital ecosystem in India and Southeast Asia has made great strides in the last decade and will continue to mature, the VC said.

“Valuations and velocity will move with markets. What endures is value creation in terms of revenue growth, profitability and free cash flow rooted in real innovation, excellence in execution and a maniacal focus on customers,” Sequoia said in a blog.

“At Sequoia India and Southeast Asia, we intend to double down on our efforts to help founders build healthy companies that will endure,” the VC added.

Sequoia said that markets in India are maturing with higher consumption power, supportive regulations, and high talent density.

“We have never seen such diversity and dynamism in the founders we partner with; we are awed by their vision and ambition. There’s a strong sense in the emerging economies and fast-changing societies across India and Southeast Asia that now is our time,” the VC said.

Sequoia claimed that Surge, a 16-week program for early-stage startups that it launched in 2019, has grown to a community of 246 founders from 112 startups across more than 15 sectors. In 2021, Sequoia had launched Sequoia Spark, a fellowship for female founders and Sequoia Build, a program for growth-stage startups.

Sequoia’s fundraise comes at a time when some of the VC’s largest portfolio startups including BharatPe, and Zilingo are in the midst of controversies over accounting irregularities. Both the companies have ousted their co-founders over alleged fraudulent accounting practices.

Moreover, the $2.85 billion fundraise comes a couple of weeks after the VC drafted a message to its portfolio companies in a 52-page presentation saying that the era of being rewarded for hypergrowth at any costs is quickly coming to an end with investors shifting towards companies who can demonstrate current profitability.

“Capital is becoming more expensive while the macro is becoming less certain, leading to investors de-prioritizing and paying up less for growth,” said Sequoia Capital in a 52-page presentation to its founders, a copy of which was viewed by Moneycontrol.

“Enterprise-value-to-revenue multiples across software have been cut in half over the last six months and now trade below the 10-year average. Growth-adjusted multiples have fallen even further and are well below the 10-year average and pushing the 10-year lows. With the macro uncertainty around inflation, interest rates, and war, investors are looking for companies that can produce near-term certainty,” the VC firm added.

Private equity (PE) and VC funding to India’s startups is slowing down  after two consecutive years of hypergrowth as easy money is drying up with central banks across the globe raising rates to tame inflation.

Sequoia in its presentation had termed the current situation as a ‘crucible moment,’ and had said, “it is hard to predict the future, but whatever happens, we want to give You a framework to emerge from any Crucible Moment stronger.” (Money Control)