Cash in Kitty, Se­quoia on Prowl in Startup Jun­gle

VC seeks to re­place Tiger, Fal­con as top in­vestor amid dearth of growth cap­i­tal

The Economic Times - - Front Page - Mad­hav.Chan­chani @times­group.com

Ben­galuru: 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 (.`6,100 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.

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 ear- ly 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 growth­stage in­vestors, they do not have an In­dia-fo­cussed fund like that of Se­quoia Cap­i­tal.

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