The vehicles pass through an information technology park in the Electronic City area in Bengaluru, India, on Friday, March 5, 2021.
Dhiraj Singh | Bloomberg | Getty Images
Sequoia Capital India closed a $ 195 million seed fund to support promising entrepreneurs across India and Southeast Asia, the venture capital firm announced on Thursday.
It is the second fund of its kind – the first was in 2019, when the company raised about $ 200 million.
Seed funds are usually the first round of official money that entrepreneurs raise in exchange for shares.
As part of a program called Surge, Sequoia provides start-up capital of up to $ 2 million, as well as access to the community to help select start-ups build their businesses.
Beginning of a new era for Indian start-ups
An increasing 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 who oversees the Surge program.
“2020 was really a story of two halves. The first half was very challenging,” he told CNBC’s “Street Signs Asia” on Wednesday, the day before the funding was announced. He was referring to the national blockade of months in India due to Covid-19, which pushed the economy into a technical recession.
“In the second half, we saw a very strong recovery – driven both by the acceleration of the adoption of digital technologies by consumers and companies and by companies being much more prudent with their cost structures,” said Anandan.
Given India’s position in the world, we think that the second access, which it is able to build for the world from India, will become very, very interesting in the next five or 10 years.
Rajan Anandan
managing director, Sequoia Capital India
In the first three months of 2021, start-ups accelerated revenue growth, increased user adoption and, in the early stages, there was an improvement in the quality of the entrepreneurs who run the companies, he added.
“In many ways, 2021 will usher in a new era for the Indian start-up ecosystem, where we will begin to see significant and significant IPOs in our ecosystem,” said Anandan.
Building for a billion and more
Although India’s start-ups have gone through tough times in the past year, the sector has emerged healthier, according to Anandan. There is more strict focus on cost structure and “extraordinary innovation” occurring in a wide variety of sectors, including educational technology, financial technology and digital health, he added.
India currently has 39 start-ups valued at $ 1 billion or more – commonly called unicorns, according to Venture Intelligence, which tracks the finances and valuations of private companies. Three of these companies reached their status in 2021, the company said.
The availability of venture capital, which is funds invested in high-risk projects for higher returns, has meant that the number of new companies has increased over the past decade. They currently represent about 10% of new companies created in India each year, according to a report on Indian start-ups by Swiss investment bank Credit Suisse this week.
“The increase in private capital flows to Indian companies has been such that fundraising from the private market has exceeded public market transactions in each year of the past decade,” Neelkanth Mishra, Asia Pacific co-chief of strategy and strategist of India’s capital at Credit Suisse, 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 led to a dramatic jump in data usage in India – particularly for mobile data, according to Mishra.
Unique opportunity for Indian start-ups
Anandan of Sequoia explained that going forward, Indian start-ups will have two unique opportunities: first, given the growing number of Internet users in India, Sequoia expects domestic companies to reach one billion connected users in the country until 2025.
“The other opportunity that Indian entrepreneurs have is to build for the world,” he said, adding the first wave of Indian start-ups doing it in the software-as-a-service space, where some of them are building and selling software to companies around the world. world.
The next generation of companies will go beyond business software for direct-to-consumer products, as well as financial and fintech services, where companies will be launched from India to serve the rest of the world, according to Anandan.
“Given India’s position in the world, we think that the second access, which it is able to build for the world from India, will become very, very interesting in the next five or 10 years,” he added.
– CNBC’s Naman Tandon contributed to this story.