Venture capital firm Sequoia Capital India has closed its second seed fund at $195 million below its 16-week accelerator-cum-seed funding programme Surge. The new fund has been raised two years immediately after Sequoia launched Surge and subsequently closed its initial fund of $200 million to help pre-Series A founders from India and Southeast Asia. The new fund is most likely to deepen the seed-stage venture ecosystem in India that normally includes a number of little rounds of funding enroute to Series A, needs more time of founders as the bet is largely on the concept, and includes early dilution of about one-fourth of founders’ stakes.
The Surge programme had kicked off in March 2019 and so far has supported 69 startups in 4 cohorts operating across more than 15 sectors. The VC firm stated that startups from the initial 4 cohorts have raised a total of $172 million in their Surge rounds even though 30 of the 52 startups from the initial 3 cohorts have raised $390 million in stick to-on capital immediately after the system. One-third of Surge startups are into software program-as-a-service even though 25 per cent are operating in customer web space. Other 13 per cent and 12 per cent are operating in the customer brands segment and B2B space respectively.
While fundraising good results is only a directional indicator of the prospective of these startups, Surge founders have observed a extremely steep uptick in the valuation of their businesses, according to Sequoia. “While some startups with a break-out trajectory have seen their valuations increase over 10X before and after Surge; on average, startups that have raised follow on capital have seen their valuations increase between 3X and 4X,” the VC firm stated. Through the Surge programme, startups are capable to raise $1-2 million and access mentoring from Byju Raveendran, Cred’s Kunal Shah, Freshwork’s Girish Mathrubootham, GO-JEK’s Nadiem Makarim, Google’s Rajan Ananadan, OYO’s Ritesh Agarwal, Zomato’s Deepinder Goyal, and so forth. Each cohort has a size of 10-20 startups.
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Sequoia Capital India has created 470 investments so far in businesses such as Byju’s, JustDial, Ola, OYO, Zomato, Druva, Pine Labs, and so forth., and has observed 44 exits, according to CB Insights. One of India’s most prolific venture capital funds Sequoia had in July final year secured a commitment of $1.35 billion for two new India and Southeast Asia focused funds: $525 million Sequoia Capital India Venture Fund VII and $825 million Sequoia Capital India Growth Fund III.
Seed-stage offers in India in 2020 had been observed recovering at a great pace as investor activity at reduce ticket sizes has enhanced in spite of a reduce quantity of total startup offers. According to Nasscom’s annual startup report launched in January this year, seed-stage funding had recovered to more than 90 per cent of 2019 levels. Overall, Covid had seemingly managed to place a slight dent on investments in Indian startups in 2020 as investors poured 21.3 per cent much less threat capital in the outgoing year from 2019. Investors had place more than $11.4 billion this year (second highest annual deal worth in the decade), down from $14.5 billion in 2019, according to the information shared by Tracxn. However, the fall in annual deal volume or the quantity of rounds was much less extreme as startups participated in 1,152 funding rounds in 2020 vis-à-vis 1,185 in 2019.