By M. Sriram
MUMBAI (Reuters) – A new Indian venture capital firm Peak XV, created after Sequoia Capital retreated from the market, does not expect its existing investors to back out, and will assure startup founders structural changes won’t affect them, its top executive said.
Sequoia Capital on Wednesday said it is splitting its businesses in China as well as India and Southeast Asia into two independent firms, which will be run without any involvement of Sequoia going forward.
The China firm will be named Hongshan in English, while in India and Southeast Asia, Peak XV will manage more than 400 portfolio companies and assets of $9.2 billion, which Sequoia previously managed.
Peak XV has started holding discussions on the changed structure with its limited partners (LPs), who committed capital to the Sequoia funds, but is not “expecting a change (in thinking),” said Shailendra Singh, its India and Southeast Asia head who previously led Sequoia’s business in the region.
While Singh did not name any LPs, typically large pension funds, sovereign wealth funds and university endowments back such funds.
Over years, Sequoia invested in some of India’s biggest startups, including food delivery firm Zomato and payments firm Pine Labs.
Sequoia also raised $2.8 billion last year to invest in Indian and Southeast Asian startups, but the majority $2.5 billion remaining will be invested by Peak XV, which is now India’s biggest venture capital firm being run by Sequoia’s former managing directors in the region.
One reason for the structural changes by Sequoia was conflict of interest issues.
“We have made 100 cross border investments last 3 years. Very often we face problems because Sequoia has already backed the main competitor,” Singh said, adding that the new structure gives each region more freedom.
Last year, Sequoia faced governance-related lapses at some of its Indian startups and it publicly said it would impose stricter checks and requirements at startups it funds.
The new entity formation comes just as many startups in India are struggling, hit by a funding squeeze that has led to layoffs as investors reckon with stretched valuations.
Since Wednesday’s announcement, Peak XV executives also assuaged concerns of some Indian founders who were worried about losing access to Sequoia’s global network of investors and executives after the changes, five founders told Reuters.
“The biggest challenge is to spend time with founders over next few weeks and explain (the changes) to them,” Singh said in the interview.
On Twitter, many executives came out in support of the new venture capital firm in the India and Southeast Asia region.
“A monumental milestone for the entire India and SEA (Southeast Asia) ecosystem – marking the rise of a strong and independent VC firm,” said Vivek Ramachandran, founder of Singapore-based cybersecurity startup, SquareX.
(Reporting by M. Sriram; Editing by Aditya Kalra and David Evans)
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