Sequoia Capital India Announces Second Seed Fund at $ 195 Million

Vehicles pass through an information technology park in the Electronic City area of ​​Bangalore, India, on Friday, March 5, 2021.

Dhiraj Singh | Bloomberg | fake images

Sequoia Capital India has closed a $ 195 million seed fund to support promising entrepreneurs in India and Southeast Asia, the venture capital firm announced Thursday.

It is the second fund of its kind, the first was in 2019, when the company raised around $ 200 million.

Seed funds are usually the first round of official money that entrepreneurs raise in exchange for shares.

As part of a program called Surge, Sequoia provides seed capital of up to $ 2 million, as well as community access to help select startups build their business.

Start of a New Era for Indian Startups

A growing number of Indian startups are expected to launch large initial public offerings this year, according to Rajan Anandan, managing director of Sequoia Capital India who runs the Surge program.

“2020 was really a tale of two halves. The first half was very challenging,” he told CNBC’s “Street Signs Asia” on Wednesday, a day before the funding announcement. He was referring to the multi-month national lockdown in India due to Covid-19, which pushed the economy into a technical recession.

“In the second half, we saw a very, very strong recovery, driven both by accelerating adoption of digital technologies by consumers and businesses, and by businesses becoming much more prudent with their cost structures.” Anandan said.

Given India’s place in the world, we believe that the second gateway, which is being able to build for the world from India, will become very, very interesting over the next five or ten years.

Rajan anandan

Managing Director, Sequoia Capital India

The first three months of 2021 saw startups accelerate revenue growth, increase user adoption and, in the early stages, improve the quality of entrepreneurs running businesses, he added.

“In many ways, 2021 will herald the beginning of a new era for India’s startup ecosystem, where we will start to see significant and sizeable IPOs in our ecosystem,” Anandan said.

Building for a billion and more

Although Indian startups went through tough times last year, the industry has emerged healthier, according to Anandan. There is more Rigorous focus on cost structure and “extraordinary innovation” taking place in a wide variety of sectors, including education technology, financial technology and digital health, he added.

India currently has 39 startups valued at $ 1 billion or more, commonly known as unicorns, according to Venture Intelligence, which tracks valuations and finances of private companies. Three of those firms obtained their status in 2021, the company said.

The availability of venture capital, which is funds invested in high-risk projects to obtain higher returns, has seen the number of new companies increase over the last decade. They currently account for about 10% of new companies created in India each year, according to a report on the creation of Indian companies by Swiss investment bank Credit Suisse this week.

“The increase in private capital flows for Indian companies has been such that private market fundraising has outpaced public market transactions in every year for the past decade,” said Neelkanth Mishra, Asia Pacific Co-Director of Strategy. and Indian Equity Strategist at Credit Suisse. he said in a presentation.

The rapid rise in smartphone ownership brought internet connectivity to the masses and a sharp drop in data prices led to a dramatic increase in data usage in India, particularly for mobile data, according to Mishra.

Unique Opportunity for Indian Startups

Sequoia’s Anandan explained that in the future, Indian startups will have two unique opportunities: First, given the growing number of Internet users in India, Sequoia expects domestic companies to generate 1 billion connected users in the country. by 2025.

“The other opportunity Indian entrepreneurs have is to build for the world,” he said, adding the first wave of Indian startups that are in the software-as-a-service space, where some of them are building and selling software to companies. of all the world.

The next generation of companies will move beyond enterprise software and to direct-to-consumer products, as well as financial services and fintech, where companies will launch from India to serve the rest of the world, according to Anandan.

“Given India’s place in the world, we believe that the second gateway, which is being able to build for the world from India, will become very, very interesting in the next five to 10 years,” he added.

– CNBC’s Naman Tandon contributed to this story.


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