We have $2.5 billion of uninvested dry powder: Peak XV Partners MD

The Indian startup ecosystem went into a tizzy as one of its most well-known venture capital firm,  Sequoia Capital, announced splitting itself into three entities. As a result, the India and Southeast Asia business of the firm has been rebranded as Peak XV Partners. After the sudden rebranding, Shailendra Singh, MD, Peak XV Partners, answered some questions posed by Business Standard in an e-mail interview. Edited excerpts:

Why is Sequoia pulling out of India at a time when the startup ecosystem in the country is growing? It does not look like just a branding exercise….

As part of the $2.85-billion funds raised for India and Southeast Asia in 2022, we have $2 .5 billion of uninvested dry powder. So all the capital raised for India and Southeast Asia as well as our portfolio of 400 plus companies remains.

It is a rebrand - Sequoia India and Southeast Asia is now Peak XV Partners. We are very bullish on India and Southeast Asia as a market and we are going to only double down. 

Have founders of the companies (you are invested in) reached out to you after the split? How are you addressing their concerns?

We have been proactively communicating with our founders across the board. We are overwhelmed by the congratulatory messages sent to us by hundreds of founders, expressing their excitement and support.

It goes to show that founders appreciate us for the partnership, for the work we’ve done with them over the past 17 years. This is our earned brand. Our performance and track record is our earned brand. Surge, a unique founder-focused programme for early stage founders, is now a huge community across several cities and countries. Spark is an industry-first fellowship programme for female founders. These are much loved and appreciated initiatives started by us in India and Southeast Asia. This is our earned brand. 

We couldn’t be more grateful for our founders’ partnership and trust.

The split is happening because too many startups within the Sequoia portfolio have cross-border business models. Isn't that an advantage for the investee firms since they can get access to such firms which can then help them grow or even leading to potential M&A opportunities?

Naturally, founders are fiercely protective of their companies, they are competitive as well. Oftentimes, more than actual competition, perceived competition in the founders’ mind results in portfolio conflict. For example, a payments startup in the US may not necessarily compete with a payments startup in Indonesia but the US founder would get upset if Sequoia India/SEA wants to go ahead and invest in the latter. Because of such conflicts, there are limitations and restrictions, which ultimately is not in the best interest of our LPs (limited partners). While we try to eliminate conflict, the brand sometimes works against us. As an independent firm, we won’t have such restrictions any more. 

Is there a non-compete clause with Sequoia Capital? If no, will this mean that XV and Sequoia can compete with each other? And what all changes with this rebranding in relation to funding strategy, sector focus and team size?

No non-compete has been signed with Sequoia Capital. There will be no changes in our investment strategy, sector focus, team size. In fact, we now have more flexibility as an independent entity. The change in structure means that we have an unbounded global opportunity that will allow us to unlock greater value for our founders and LPs.  

What happens to all the investments done so far? Will Sequoia get any profit-share? How will exits be treated?

We have $9-billion assets under management across 13 funds that have invested in 400+ companies. This remains the same. The profit-sharing agreement is being dissolved.

What happens to the LP commitments? What will be the fund size of XV?

There won’t be any change in fund sizes or LP commitments.