• With Rs 6,100 crore fund, Sequoia Capital sees 2016 as great year to make new investments in startups

    Sequoia Capital India strikes a discordant but optimistic note when it says 2016 will be of a “wonderful vintage” and a great year to make new investments in startups.

    Armed with its largest India-focussed fund of $920 million (Rs6,100 crore), raised this year, Sequoia is scouting for early- and mid-stage deals, seeking to capture territory vacated by retreating giants such as Tiger Global Management. “We are aggressively looking for opportunities to invest because we feel 2016 will separate the men from the boys,” Mohit Bhatnagar, MD at Sequoia Capital India, told ET.

    The venture capital firm is an investor in prominent Indian startups such as data analytics firm Mu Sigma, bill payments firm FreeCharge and quick-delivery startup Grofers.

    Bhatnagar declined to comment on the new fund, which two sources confirmed that it raised $920 million.

    Sequoia’s return to aggressive investing comes at an opportune time when domestic startups are starved for growth capital, which will potentially give the venture capital firm the dominant hand in determining valuations that are likely to be tempered and realistic.

    Also, with India’s startup ecosystem forced into a slowdown of sorts by wary investors after two years of unfettered growth, emerging companies, both young and mature, are reverting to the fundamentals of running a business, and those that can’t are shutting down, scaling back or being acquired which will give Sequoia a more disciplined crop of firms to pick from. Sequoia’s new fund takes its total assets under management in India to over $3 billion. Other VCs, too, have raised new corpuses since 2015 Nexus Venture Partners has raised a $450-million fund; SAIF Partners, $350 million; and Accel Partners, $305 million but Sequoia’s latest fund dwarfs them all.

    Along with its Global Growth Fund, Sequoia, an early backer of Google and WhatsApp, will have significant dry powder to continue backing its portfolio companies in a tough market as well as inject growth capital into startups backed by other venture capital firms. Sequoia expects increased investment activity in sectors like enterprise software, software-as-a-service, financial technology, and “traditional sectors” like education. It recently led a $75-million funding in education technology startup Byju’s.

    “Lots and lots of seed and series-A (fund-raising) activity has happened over the past two years. We are confident that many of these companies, including our portfolio firms, will break out from the clutter, making 2016 a wonderful vintage,” said Bhatnagar, who sits on the boards of restaurant discovery and delivery platform Zomato and news and ebooks application Dailyhunt.

    Industry experts said Sequoia’s mega fund will put it back at the centre of action for startups seeking to raise growth capital of $10-50 million, a space dominated by hedge funds like Tiger Global, Steadview Capital and Falcon Edge in the past two years. While VC firms like Norwest Venture Partners and Bessemer Venture Partners are also active growth-stage investors, they do not have an India-focussed fund like that of Sequoia Capital.

    “The gold rush is now over and startups are going back to the usual suspects (for capital) now,” said Abhishek Goyal, cofounder of data analytics company Tracxn. “The likes of Sequoia will become the primary players in the market.”

    For Sequoia, the slower pace of fund-raising is a blessing, as it will allow the firm enough leeway to conduct detail evaluations before striking a deal. “There was a lot of market noise (in) the past two years and it was tough for investors to spend time with companies given the competitive investment dynamics,” said Bhatnagar. “That will definitely change.” 

    Share This