Sequoia Capital India: Back to the basics

Problems aside, at $1.4 billion invested in India over 10 years, Sequoia stands tall in the venture capital market

Shailendra Singh of Sequoia Capital. In the last 11 months, the firm has put $272 million to work across a record 54 deals.
Shailendra Singh of Sequoia Capital. In the last 11 months, the firm has put $272 million to work across a record 54 deals.

Sequoia Capital is on a blistering dealmaking run in India. In the last 11 months, the Mumbai-based venture capital firm has put $272 million to work across a record 54 deals. That’s nearly as much as the entire portfolio of some of its peers.

What’s India’s largest venture capital investor up to? Sequoia did not participate in this story, citing a quiet period till mid-December.

The gaggle of start-ups the firm has backed this year—such as Citrus Payment, Roadrunnr, Practo, Oyo Rooms, Grofers, TinyOwl and Craftsvilla—offers some clues. Out of the 54 deals closed, 14 at the seed or Series A stages, Sequoia was the first or one of the first institutional investors. It closed another 12 deals in the Series B stage. The momentum continues at a visibly accelerated pace from last year when the firm made 36 investments. Some of Sequoia’s early-stage investments this year include Internet of Things start-up TeWee ($1.75 million; Sequoia and seed investments fund India Quotient), fashion discovery portal Voonik ($5 million, Sequoia and Seed Fund Advisors), Travel entertainment start-up Press Play ($2.2 million, Sequoia and angel investors).

The nature of the ongoing deal run indicates that Sequoia is in a hurry to make up for lost time. Having missed the bus on discovering the current generation of unicorns from India, it wants to make sure it’s early in the game for the next generation of start-ups that could potentially hit billion-dollar valuations.

Incidentally, even if it hasn’t discovered them, the firm does count four of India’s most valuable start-ups in its portfolio. In April this year, it gained a backdoor entry into Snapdeal, currently valued at $4.8 billion, when the e-commerce marketplace acquired Sequoia portfolio company Freecharge in a cash-and-stock deal. The deal reportedly gave Sequoia a 3% stake in Snapdeal. It entered cab hailing company Ola, currently valued at $5 billion, last year in a Series C round with a consortium of investors. Similarly, it entered restaurant discovery company Zomato at a later stage, participating in a $37 million funding round with Info Edge India Ltd in late 2013. Mu Sigma, the big data analytics firm valued at $1.5 billion, became a Sequoia portfolio firm in 2011 when it raised a $25 million Series C funding round.

The firm’s absence at the earlier stages in these deals can be explained by developments in its recent past investing in India. The Menlo Park, California-based firm started investing directly in India in 2006, after sealing a merger with local venture capital firm WestBridge Capital Partners. Between 2006 and 2011, the firm raised two India-focused funds worth $1 billion. Like most Silicon Valley firms, given that the technology and consumer Internet markets in India, were not yet deep enough, it decided to pursue a hybrid investment strategy.

In 2011, WestBridge decided to demerge from Sequoia. The WestBridge founding partners wanted to focus on public market investments. By this time, the Sequoia India portfolio was a mix of early-stage start-ups and mature growth-stage companies. There were even a few public market investments. Following the split from WestBridge, the new team leading investments at Sequoia—Shailendra Singh, Abhay Pandey, Mohit Bhatnagar, V.T. Bharadwaj and G.V. Ravishankar—decided to go back to the basics. Early-stage, even as early as seed, technology investments were back on the table. The move served to align Sequoia’s India strategy more closely with its Silicon Valley headquarters.

Since then, Sequoia has stepped up investments in technology companies across segments such as e-commerce, healthcare, hyperlocal delivery, food-tech and fashion discovery, etc. It is currently investing from a $720 million India fund, its fourth raised last year.

It is now reportedly on the road to raise another fund, its biggest yet with a target corpus of $800 million.

Despite the sharpened focus on technology, non-technology investments are not completely off the table. Healthcare and pharma, in particular, has been a popular sector with the firm since its early days and that continues. In the last 15 months, the firm has invested nearly $90 million across six deals in pharma and healthcare firms, increasing its exposure to the fast-growing sector. The investments include Akumentis Healthcare, MedGenome Labs, La Renon Healthcare and Curatio Healthcare.

“We started looking at pharma in 2011. We scanned the environment and we came up with a list of companies we would like to invest in. Over the last three-four years, we have executed a good part of that strategy,” Sequoia India managing director Abhay Pandey said in an August interview. Data compiled by VCCEdge, which tracks deals, also shows that 2015 has been the most active year for Sequoia in terms of investments in pharmaceutical and healthcare firms, both by the number of deals and value.

While it races to cover lost ground, the other big issue Sequoia has been dealing with is exits—rather the lack of them. Most of its exits so far have been from the non-tech investments from its earlier years, many of which were made during the term of the Sequoia-WestBridge partnership. These include Paras Pharma, Mannapuram Finance and SKS Microfinance. It also made a successful partial exit from local information services firm Just Dial after the company went public in 2013. Exits though appear to have picked up. According to VCCEdge, the firm has made 10 exits in the current year, taking home $163.1 million. Almost all of the money from exits has come from its public markets investments. Some of the notable exits include PI Industries ($53.2 million), Eclerx Services Ltd ($48.2 million) and DHFL Ltd ($34.9 million). Sequoia’s tech start-up investments are yet to see any meaningful exits.

Problems aside, at $1.4 billion invested in India over 10 years, Sequoia stands tall in the venture capital market here. And, if it is successful in getting its house in order, which appears to be the case, it can still give every other investor in the Indian start-up ecosystem a run for their money.