Vehicles pass in front of 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 an initial $ 195 million fund to support promising entrepreneurs from India and Southeast Asia, the venture capital firm announced on Thursday.
It is the second such fund: the first was in 2019, when the company raised about $ 200 million.
Seed funds are usually the first round of official money that employers raise in exchange for equity.
As part of a program called Surge, Sequoia provides start-up capital of up to $ 2 million, as well as community access to help selected emerging companies build their business.
Beginning of a new era for Indian start-ups
A growing number of Indian start-ups are expected to launch large initial public offerings this year, according to Rajan Anandan, managing director of Sequoia Capital India in charge of the Surge program.
“2020 was really a two-half story. The first half was very difficult,” he told CNBC’s “Street Signs Asia” on Wednesday, a day before the funding announcement. He was referring to India’s national blockade for months during the Covid-19, which pushed the economy into a technical recession.
“In the second half, we saw a very, very strong recovery, driven both by the acceleration of the adoption of digital technologies by consumers and businesses and by companies that were much more cautious with their structures. of costs, ”Anandan said.
Given India’s place in the world, we believe that the second access, which can be built for the world from India, will become very, very interesting over the next five or ten years.
Rajan Anandan
CEO, Sequoia Capital India
In the first three months of 2021, emerging companies accelerated revenue growth, increased user adoption and, in the early stages, improved the quality of entrepreneurs running companies, he added.
“In many ways, 2021 will herald the beginning of a new era for the Indian start-up ecosystem, where we will begin to see important and important stock market entries in our ecosystem,” Anandan said.
Building for a billion and more
Although emerging companies in India experienced difficult times last year, according to Anandan, the industry has been healthier. There is more added a rigorous approach to cost structure and “extraordinary innovation” in a wide variety of sectors, including educational technology, financial technology, and digital health.
India currently has 39 emerging companies valued at $ 1 billion or more, commonly known as unicorns, according to Venture Intelligence, which tracks the finances and valuations of private companies. Three of those companies achieved their status in 2021, the company said.
The availability of venture capital, which are funds invested in high-risk projects for higher returns, has seen an increase in the number of new firms in the last decade. They currently account for about 10% of new businesses set up in India every year, according to a report on Indian start-ups by Swiss investment bank Credit Suisse this week.
“The increase in private capital flows for Indian companies has been such that private market fundraising has outpaced public market transactions every year for the past decade,” said Neelkanth Mishra, co-director of the Asia Pacific strategy and India strategist on Swiss capital at Credit Suisse, he said in a presentation.
The rapid rise in smartphone ownership has brought Internet connectivity to the masses and a sharp drop in data prices has caused a dramatic jump in data usage in India, especially for data mobile, according to Mishra.
Unique opportunity for Indian start-ups
Anandan of Sequoia explained that in the future, emerging Indian companies will have two unique opportunities: first, given the growing number of Internet users in India, Sequoia expects domestic companies to be making a billion. users connected to the country in 2025.
“The other opportunity Indian entrepreneurs have is to build for the world,” he said, adding the first wave of Indian start-ups found in the Software-as-a-Service space, where some of them build and they sell software. to companies around the world.
The next generation of companies will go beyond business software and move to direct consumer products, as well as financial and fintech services, where companies will launch from India to serve the rest of the world, according to Anandan.
“Given India’s place in the world, we believe that the second access, which can be built for the world from India, will become very, very interesting in the next five or ten years,” he added.
– CNBC’s Naman Tandon contributed to this story.