The former head of Sequoia Capital’s India unit said that the country was getting a “huge” boost as investors moved their money from China, as geopolitical conflicts reshaped the global venture capital markets.
Shailendra Singh is the managing director of Peak XV. One of Asia’s largest tech investors, with $9bn of assets under management. He said that investment activity has picked up and he hopes to “double” this year the amount of dollars deployed by 2023.
“We believe a reallocation of capital from China to India will happen. “There is a huge interest in India from new limited partners, and I believe that all VCs will benefit,” Singh said in his first interview after Sequoia Capital split last year into three separate companies in the US, China, and India amid deteriorating relations between Beijing, Washington, and Washington.
Singh, who is at Peak XV since 18 years, and has led the company since 2011, said that the firm sees opportunities in the US, and will continue to invest heavily in South-East Asia where the former Sequoia China has opened an office as a sign of future competition between the two businesses.
US lawmakers have been pressuring US-based investors to reduce their funding of Chinese technology. This is especially true for start-ups that focus on artificial intelligence or semiconductors.
Singh said that historically, China’s allocations to investors were so large and India’s so low that even small changes “feel very huge” for India.
According to PitchBook, Peak XV (pronounced “Peak 15”), which represented Mount Everest prior to its name, was India’s most active investor last year. It struck 39 deals, not including any follow-on investments.
India’s ecosystem of start-ups — which is second only to China for VC and Growth Funding in the region — has been hit harder than any other market in the recent downturn. According to Tracxn, inflows into tech funding fell 60 percent last year, from $27.8bn to $10.6bn. The US and China VC market fell by a third each, and the US VC market fell 45 percent.
Peak XV has seen its portfolio suffer blow-ups due to a downturn in technology in recent years.
Singh stated that the excesses in the past few years, when VCs and startups chased the speed of growth over profits, weren’t unique to Peak XV, or even the latest cycle, and that everyone had “learned their lessons”. Peak XV has its portfolio on sale at a 30-40% discount from its previous round.
Singh said, “I believe we have passed the lows.” The quality and quantity of deals that are in the pipeline is impressive. . . “The price of the car has risen sharply.”
Peak XV, a lesser-known division of Sequoia (the storied Silicon Valley VC company that invested in Apple, ByteDance, and Zoom), is nevertheless able to stand out as if it were purely its own.
Sequoia Capital funds’ pre-split performances, as revealed by a limited partnership last year, showed some India and South-east Asia funds’ poorer returns compared to the group’s China funds or US funds. Singh stated that India is at an earlier stage, and does not have large companies like China’s Pinduoduo and ByteDance.
Singh stated that India’s performance cannot be compared with the US or China because India does not yet have the billions of dollars in market capitalization of [those countries]. When India’s Gross Domestic Product reaches $15tn I am sure that we will have these [big companies] as well.
Peak XV has become independent as Sequoia’s US and China divisions also exercise their independence as investors. HongShan, Sequoia’s former China unit , opened a Singapore Office, on Peak XV’s turf, and invested in Europe.
Singh stated that he was interested in US opportunities, but did not see this as a threat to Sequoia US’s business.
He said that Peak XV did not intend to become a global brand. “We have a great right to succeed in India and South-East Asia. We don’t have a good right to triumph in the US.” “That being said, we could be a complementary investment to an American company that wants to go global in the future.”
Peak XV’s next step will be to invest in US-based companies that have a “strong transnational component”, he added. Approximately 30 founders from the group portfolio have relocated to the US over the past few years. Singh stated that they can now be a more effective partner for their cross-border founders, as the company is independent.
Peak XV, in addition to its 400-strong portfolio of start-ups and its $1.8bn of public securities, holds 15 companies that have gone public since 2020. These include Zomato, Honasa, and Truecaller. Singh stated that Peak XV will distribute the majority of this money back to its limited partner. It hopes to achieve a gross internal rate return of 30 percent from its holdings, and distribute that to investors in two to three year.
Singh is still focusing on the subcontinent, despite having $2bn of dry powder available to invest.
“We love the way India is developing. . . He said that there was more optimism in our market, and our top priority is to keep winning [there].