Sequoia raises record $1.35 billion to back startups in India, Southeast Asia

BENGALURU: Top Silicon Valley investor Sequoia has raised $1.35 billion for its new fund focused on investing in startups in India along with Southeast Asia. The move comes as the Covid-19 pandemic speeds up the adoption of digital services across sectors like education, payments and software. The fund raised under Sequoia Capital India will be a record corpus for the region, and takes the firm’s assets under management to over $5.7 billion.
The VC firm, which has been an early backer of 11 unicorns — including India’s most valued startups like ed-tech decacorn Byju’s and hospitality player Oyo — has approved over half a dozen deals during the June quarter. It has already started seeing businesses in SaaS (software-as-a-service), education, gaming, digital content and payments beat their projections for the quarter even as those in areas like travel, transportation and retail have been hit.
Sequoia Capital India MD Shailendra Singh feels that the pandemic offers startups a time to prioritise on building more profitable businesses than just grab market share. “We want to encourage founders to go for more sustainable growth against this idea to raise and burn capital. We worry that Nasdaq is at an all-time high and technology stocks in the US markets are trading at very high valuations. So will that spill over to private markets and will we see another bull cycle and everyone goes back to burning money?” he told TOI in an exclusive interview.
Sequoia has split the corpus into two vehicles — $525 million for early stage, and $825 million for growth stage. The firm had raised a separate $195-million fund last year for seed deals, including its accelerator programme Surge. Up to 20-30% of the funds will be invested in Southeast Asia, where Sequoia has backed the region’s most valued internet companies like ride-hailing and delivery player Gojek and e-commerce platform Tokopedia.
The split in the fund comes as the ecosystem has now matured, with more startups reaching valuations of over $5-10 billion. More than 20 portfolio companies of Sequoia have crossed revenues of $100 million, with many reaching that milestone faster than the previous batch of companies. But according to Singh, more measures can be taken to unlock value of Indian startups and investors more exit options.
“We are really strongly requesting the government to create the enabling resolution for Indian companies to list on Nasdaq (and other global exchanges), which will be a game changer for the ecosystem. US markets value tech companies differently than Indian markets. It will also create a wave of further FDI into India because investors across the world can invest in the best of the Indian companies and will get to taste success,” he said.
Sequoia’s mega fund also comes at a time when the Indian government has put restrictions on investments from China, which has left founders who depended on players like Tencent and Alibaba for money worried. But given the “trillions of dollars with no opportunity cost of capital available in the world” looking for next growth markets, founders building a sustainable business should not be worried, according to Singh, who is also a part of the Forbes Midas Touch list of top global venture investors.
“Short term there might be some pain, but long term there is enough capital available — whether it is South Korea, Japan, the US, Europe or sovereign funds from Singapore or the Middle East...Tech is going to generate significantly large companies over the next decade,” he said. He added that India and Southeast Asia should also mirror the US in the long run where Apple, Amazon, Google and Microsoft are the most valued companies.
One of the companies looking to become a part of that club is Jio Platforms, the telecom services provider owned by Mukesh Ambani’s Reliance Industries. Over the last few months, Jio has raised $15.5 billion at a valuation of over $65 billion from backers, including US social media giant Facebook, as it looks at a broader digital services play. This would mean it will compete with startups across e-commerce and education-technology.
“What Jio has done by bringing low-cost, high-speed internet across the country has helped the whole startup ecosystem. Now their ambitions are becoming more mainstream and conflicting with some of the important startups. In execution-oriented industries, like areas that require big infrastructure build-out, they will be a strong competitor. What we have to see is how well they do in areas where building software and having world-class engineers is the moat,” said Singh.