VC firm Sequoia Capital closes second seed fund at $195 million to back startups in India, Southeast Asia

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March 25, 2021 1:20 PM

Startups from the first four Surge cohorts have raised a total of $172 million while 30 of the 52 startups from the first three cohorts have raised $390 million in follow-on capital after the programme.

The Surge programme has supported 69 startups so far in four cohorts.

Venture capital firm Sequoia Capital India has closed its second seed fund at $195 million under its 16-week accelerator-cum-seed funding programme Surge. The new fund has been raised two years after Sequoia launched Surge and subsequently closed its first fund of $200 million to support pre-Series A founders from India and Southeast Asia. The new fund is likely to deepen the seed-stage venture ecosystem in India that typically involves multiple small rounds of funding enroute to Series A, requires more time of founders as the bet is largely on the idea, and involves early dilution of around one-fourth of founders’ stakes.

The Surge programme had kicked off in March 2019 and so far has supported 69 startups in four cohorts operating across over 15 sectors. The VC firm said that startups from the first four cohorts have raised a total of $172 million in their Surge rounds while 30 of the 52 startups from the first three cohorts have raised $390 million in follow-on capital after the program. One-third of Surge startups are into software-as-a-service while 25 per cent are operating in consumer internet space. Other 13 per cent and 12 per cent are operating in the consumer brands segment and B2B space respectively.

While fundraising success is only a directional indicator of the potential of these startups, Surge founders have seen a very steep uptick in the valuation of their companies, 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 said. Through the Surge programme, startups are able 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, etc. Each cohort has a size of 10-20 startups.

Also read: CEA Krishnamurthy Subramanian: Mindset of always asking what govt can do for startups should change

Sequoia Capital India has made 470 investments so far in companies such as Byju’s, JustDial, Ola, OYO, Zomato, Druva, Pine Labs, etc., and has seen 44 exits, according to CB Insights. One of India’s most prolific venture capital funds Sequoia had in July last 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 deals in India in 2020 were seen recovering at a good pace as investor activity at lower ticket sizes has increased despite a lower number of total startup deals. According to Nasscom’s annual startup report launched in January this year, seed-stage funding had recovered to over 90 per cent of 2019 levels. Overall, Covid had seemingly managed to put a slight dent on investments in Indian startups in 2020 as investors poured 21.3 per cent less risk capital in the outgoing year from 2019. Investors had put over $11.4 billion this year (second highest annual deal value in the decade), down from $14.5 billion in 2019, according to the data shared by Tracxn. However, the fall in annual deal volume or the number of rounds was less severe as startups participated in 1,152 funding rounds in 2020 vis-à-vis 1,185 in 2019.

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