It is a move that has taken the private equity industry by surprise. Four managing directors at Sequoia quit in tandem to start Westbridge Capital Fund, a public markets fund, in India. Sumir Chadha, one of the four who stepped out of Sequoia, spoke to Raghuvir Badrinath on the future plans and regrouping under WestBridge Public Fund. Edited excerpts:
Very few people in the industry knew this was happening. How did you all plan?
It had been a while since the four of us started thinking about a public-markets fund. We initiated discussions with our global management and limited partners (LPs). Sequoia does have some exposure to public markets — around 10 per cent of the investment. Investing in public markets requires a different strategy and focus. When we spoke to our LPs and global management, they understood. We are exiting amicably.
Why just public markets and how different will it be from Sequoia’s investments in public markets?
When we started WestBridge Capital — more than a decade ago — the venture capital industry in India was at a nascent stage. We were actively involved in the development of ecosystem here and continued this when we became part of Sequoia India. Today, Sequoia India manages a total capital of $1.8 billion. What we are now seeing is that public markets in India are in their growth stage. We see an opportunity like the one we saw in the venture, a decade ago. There is no strong organised player who is into value investing in public markets. Also, the ecosystem is nascent. Although Sequoia does invest in public companies, its approach is long-term, like for an investment in a private company.
How will your new fund be structured? Also, is there any corpus you have firmed up?
I will be based in California and the other three will be in Bangalore. We will have a lot of flexibility as far as the fund is concerned. We will take some time — may be two-three months — to formalise the structure, fund corpus, investors and a fine print on how to proceed. Broadly, we intend to have a fund firmed up by the end of this year.
Four of you are quitting Sequoia at a stage when the private equity and venture capital industry is back on a firm footing after a lull in 2009. How is the transition being planned?
Abhay Pandey, G V Ravishankar, Mohit Bhatnagar, Shailendra Singh and V T Bharadwaj will be the five managing directors taking Sequoia India Capital forward. They have tremendous experience and have been involved with a majority of companies in all Sequoia Capital funds in India. They have also worked as partners with entrepreneurs of various portfolio companies. They have experience and expertise in early stage, venture, growth and public market investments. Sequoia still has about $600 million to be invested from funds which have been raised for India and it will be another three years before it is drawn down. Around $500 million is with the growth fund, while $120 million is with the venture stage fund. During 2010, Sequoia had some great exits and we are working on a few more in 2011.
The business of venture capital and private equity is intensely based on equations between people — be it with investors or with investee companies. How do you think it will pan out after the four of you exit Sequoia?
Although we will be exiting from Sequoia in relative terms of new investments, we will continue to be on the boards of investee companies. We are discussing our decisions with the investee companies and have briefed them that we will continue to be on their boards and guide them forward until Sequoia decides an exit. So, from an investee point of view, there will be no change and we will be on their boards.
