Sequoia adds $210M to existing India-focused fund, raises record $740M in total

Global VC firm Sequoia Capital, which makes both venture capital and growth equity investments in India, has added $210 million to the $530 million it raised last year for its fourth India-focused fund, taking the total fund size to $740 million, sources said.

This is a record sum to be raised for venture investments in India and Sequoia beat its own milestone that it hit in May 2014 when it announced closure of the new fund at $530 million. Most large India-focused VC funds have a corpus in the $300-400 million range.

VC firms are now raising larger funds to match up to the investment opportunities in the country. Rising valuations of startups have pushed up the average VC deal size in the country.

Indeed, the average deal size in Series B and Series C, the second and third significant round of institutional funding round for startups comprising the mid-stage of VC funding cycle, which was stuck at the $5 million and $10 million bracket for five years, surged last year. The average size doubled at both the levels to around $10 million and $20 million, respectively (click here for more on that).

This is partly to do with the entry of large hedge funds as venture investors.

Rising deal sizes means VC firms need to bring in additional cash in follow-on funding rounds. VC firms which are typically early stage investors usually participate in fresh rounds to restrict equity dilution. They eventually exit at a later stage.

One of the most prolific VC investors in the country, Sequoia Capital in particular needs a larger sum to back its portfolio firms in the new funding rounds. It invests between $1 million and $10 million in early stage and between $10 million and $100 million in growth stage companies. In fact, Sequoia's India team has also made some overseas investments in ventures such as Indonesian e-com venture Tokopedia and Scandinavian mobile internet startup Truecaller. This pushes up its need to larger investible corpus.

Early this week, Sequoia co-led a new $50 million funding round in furniture e-tailer Urban Ladder, along with TR Capital.

Sequoia is yet to make a formal announcement for the new fund. Calls made and emails sent to Sequoia spokesperson did not elicit any response.

The Times of India which first reported the development, said that the additional money was raised from existing limited partners or LPs (the investors who pool in money to be invested by the VC and PE funds).

A bunch of other VC funds have raised or are on the road to raise money. Mayfield India II raised $108 million for its second fund, Lighthouse raised $125 million, SAIF Partners raised $350 million and Accel Partners raised $305 million for its fourth fund.

(Edited by Joby Puthuparampil Johnson)

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