Sequoia raises $ 195 million for the second seed capital fund to assist entrepreneurs in India and Southeast Asia

Vehicles drive past an information technology park in the Electronic City area of ​​Bengaluru, India on Friday, March 5, 2021.

Dhiraj Singh | Bloomberg | Getty Images

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

It’s the second such fund – the first was in 2019 when the company raised about $ 200 million.

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

Through a program called Surge, Sequoia offers up to $ 2 million in seed capital and community access to help select startups build their businesses.

Start of a new era for Indian startups

A growing number of Indian startups are expected to launch large IPOs this year, according to Rajan Anandan, a sequoia Capital India executive who oversees the surge program.

“2020 was really a two-half story. The first half was very challenging,” he told CNBC’s Street Signs Asia on Wednesday, a day before the funding was announced. He was referring to the month-long national lockdown in India due to Covid-19 that plunged the economy into a technical recession.

“We saw a very, very strong rebound in the second half of the year, driven by the acceleration in the adoption of digital technologies by consumers and businesses, and by companies that are much more cautious about their cost structures,” said Anandan.

Given India’s place in the world, we believe that the second gateway that India can build for the world is going to be very, very interesting in the next five or ten years.

Rajan Anandan

Managing Director, Sequoia Capital India

In the first three months of 2021, startups accelerated revenue growth, increased user adoption and, at an early stage, improved the quality of the entrepreneurs running the companies, he added.

“In many ways, 2021 will usher in a new era for the Indian startup ecosystem in which we will see sizeable, significant IPOs in our ecosystem,” said Anandan.

Build for a billion and more

Although India’s startups have had tough times over the past year, the industry has gotten healthier, according to Anandan. There is more He added that there is a strict focus on cost structure and “exceptional innovation” in a variety of sectors including educational technology, financial technology and digital health.

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

The availability of venture capital, which is funds invested in high-risk projects for higher returns, has led to an increase in the number of new startups over the past decade. According to a report by Swiss investment bank Credit Suisse on Indian startups earlier this week, they currently account for around 10% of the new businesses started each year in India.

“The surge in private equity flows for Indian companies has meant that private market fundraising has outperformed public market transactions for every year over the past decade,” said Neelkanth Mishra, co-director of strategy for Asia Pacific Raum and Indian equity strategist at Credit Suisse said in a presentation.

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

Unique opportunity for Indian startups

Sequoias Anandan stated that Indian startups will have two unique opportunities going forward: First, given the growing number of internet users in India, Sequoia expects domestic companies to produce 1 billion connected users in the country by 2025.

“The other chance Indian entrepreneurs have is to build for the world,” he said, adding that the first wave of Indian startups are doing so in software-as-a-service, where some of them are Develop and sell software for companies worldwide.

The next generation of companies will focus on direct-to-consumer products beyond enterprise software, as well as financial services and fintech, where companies will start out of India to serve the rest of the world, Anandan said.

“Given India’s place in the world, we believe that the second gateway that India can build for the world is going to be very, very interesting in the next five or ten years,” he added.

– CNBC’s Naman Tandon contributed to this story.

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