The vehicles pass by 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 in 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 entrepreneurs raise in exchange for equity.
As part of a program called Surge, Sequoia offers up to $ 2 million in initial capital, as well as community access to help selected start-ups build their business.
The 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, CEO of Sequoia Capital India, which handles the Surge program.
“2020 was really a two-part story. The first half was very challenging,” he told CNBC for “Street Signs Asia” on Wednesday, a day before the funding announcement. He was referring to the national blockade of India for several months because of 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 accelerating adoption of digital technologies by consumers and businesses, and by companies that have become much more cautious with their cost structures,” he said. Anandan.
Given India’s place in the world, we believe that the second access, which can be built for the world in India, will become very, very interesting in the next five or 10 years.
Rajan Anandan
CEO, Sequoia Capital India
In the first three months of 2021, start-ups accelerated revenue growth, increased user adoption and, in the early stages, improved the quality of entrepreneurs who run companies, he added.
“In many ways, 2021 will herald the beginning of a new era for the Indian startup ecosystem, where we will begin to see significant and significant IPOs in our ecosystem,” Anandan said.
Building for a billion and more
Although Indian start-ups went through hard times last year, the industry has become healthier, according to Anandan. There are several he added, the rigorous focus on cost structure and the “extraordinary innovation” taking place in a wide variety of sectors, including education technology, financial technology and digital health.
India currently has 39 start-ups valued at $ 1 billion or more – commonly referred to as unicorns, according to Venture Intelligence, which tracks the financial statements and valuations of the private company. Three of these companies will reach their status in 2021, the company said.
The availability of venture capital, which is funds invested in high-risk projects for higher returns, has seen an increase in the number of start-ups in the last decade. They currently account for about 10% of new companies set up 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 for Indian firms has been such that fundraising in the private market has outpaced public market transactions every year for the past decade,” said Neelkanth Mishra, co-head of the Asia-Pacific strategy and chief strategist. capital on India under Credit Suisse, said in a presentation.
The rapid rise in smartphone ownership has brought mass internet connectivity and a sharp drop in data prices has led to a dramatic increase in data usage in India – especially for mobile data, according to Mishra.
Unique opportunity for Indian start-ups
Anandan from Sequoia explained that in the future, Indian start-ups will have two unique opportunities: First, given the growing number of internet users in India, Sequoia expects domestic companies to make a billion of users connected in the country by 2025.
“The other opportunity that Indian entrepreneurs have is building for the world,” he said, adding the first wave of Indian start-ups doing so in the Software-as-a-Service space, where some of them build and sell global business software.
The next generation of companies will move beyond business software and become direct products to consumers, as well as financial services and fintech, where companies will launch from India to satisfy 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 in India, will become very, very interesting in the next five or 10 years,” he added.
– CNBC’s Naman Tandon contributed to this story.