It’s been nearly a year since the founding members of Sequoia India exited to focus on public markets. But Sequoia India has been holding steady and continuing its investments without any vacuum. In an interview with Raghuvir Badrinath, Managing Director Shailendra Singh details how things have been shaping up and discusses the challenges for this much-celebrated investment fund. Edited excerpts:
The four founders who exited Sequoia India had deep relationships with many companies. After their exit, how have you managed to stabilise operations?
We have been as steady as ever. We have not felt any vacuum after their exit. They wanted to do public investments, so they exited. They are still on the boards of five-eight companies and they will continue to be there until an exit happens. There is no doubt that we rely heavily on relationships in this business, but relationships are built as well. Last year (2011) was one of the busiest for us, as we invested around $200 million (Rs 1,112 crore).
You have been investing in India for a decade. How different is the scene now?
Investors are a lot more cautious this year and e-commerce companies have been finding it tough to raise further funds. The growth market is a tougher space to be in. A combination of lack of interest in core growth sectors like infrastructure, coupled with a surprising reluctance by entrepreneurs to dilute equity to raise money, has slowed deal flow in the growth space. The public markets have also not been kind to companies wanting to raise money and we all know that numerous companies have filed for initial public offerings (IPOs) last year, only to postpone their plans thanks to the market. We continue to look at technology and consumer sectors as the two large pillars of our investment strategy in India, and believe we will continue to find high quality investments in these verticals.
And, aren’t exits from investments becoming much tougher?
Yes, exits from investments have been a challenge for most investment firms in India. The M&A market has been sluggish and the IPO market is stagnant. At Sequoia Capital, we take a long-term view and the life of our funds is up to 12 years. Hence, we are under no pressure to create artificial exit scenarios in our companies. We constantly work with our portfolio companies and work towards an exit when a window comes by.
You have been investing from three funds with a total corpus of $1.4 billion. With the kind of pace you are investing at, won’t you be required to raise a new fund?
We still have $300-400 million (Rs 1,667-2,223 crore) left from the corpus. One is a venture capital fund and there are two growth funds. We will start raising a new India focussed fund sometime next year. We have not decided yet on the corpus. But what we have decided is to have a single structure from a multiple fund structure.
The same fund will do venture as well as growth equity investments. What we have witnessed is that the same companies that we make venture investments in may require growth stage funds, and we are best suited to doing multiple rounds in such scenarios.