Sequoia India MDs On Transition & Venture Investing Focus

16 May, 2012

Sequoia Capital India, the early stage venture capital firm which entered India in 2006 with the acquisition of Westbridge Capital, says it will be business as usual after it witnessed a major leadership transition.  The four founding MDs – Sumir Chadha, KP Balaraj, Sandeep Singhal and SK Jain — left the private capital investment firm to build a public market investment firm from grounds up. The event, which is one of the most siginficant leadership transition in the Indian private equity history, will position Sequoia as a private capital investment firm backing private companies and entrepeneurs who are excited about their business and growing them. Abhay Pandey, Shailendra Singh, Mohit Bhatnagar, VT Bharadwaj and GV Ravishankar comprise the new team managing the India business of Seqouia Capital. In an interview, Abhay Pandey and Shailendra Singh reiterate that there is no shift in Sequoia’s strategy for India and that they will stick to the core philosophy of Sequoia which is venture and growth investing. Both the MD’s are very positive on the returns that they will make from the Indian portfolio and add that “the best is yet to come.”

How well-timed was this spin-out? What does it mean to Seqouia Capital India?

Abhay: The timing is good from our point of view because we feel that the entire team managing the business in India now is extremely experienced. We have 20 professionals who have been involved with Sequoia in different roles for 2-6 years. So, it is a really well-balanced, experienced team which has been doing this business and have seen various cycles of ups and downs in terms of the business environment. We are at this stage that there is a lot of confidence and the franchise in India is looking good than before.

They (WestBridge team) are leaving at a time when there is knowledge, experience and confidence to grow on the business further. Of course, Sumir, KP and SK were a very significant part in building the franchise here. We continue to operate the business in the same fashion and look at business opportunities the way we have been doing. We continue to back entrepreneurs who are excited about the business that they are building.  There is no chage in our model. This has worked for us.  The strength of the team is very high and we are sure that we will continue doing the good work.

Shailendra : Sequoia’s commitment to India is as resolute as it ever was. We are here for a very long period. We have several hundred million dollars of uninvested capital and many of our companies are market leaders and we are very confident of the prospects of our business going forward. So, it is business as usual. We are quite excited and optimistic about our model as it has worked for us. We are very excited about our current portfolio and it should make good returns for us.

Any shift in your investment strategy going forward?

Abhay: Seqouia is known for venture capital and early growth investing and that will continue to be our focus in India here going forward. Historically, we have done some public market investing but that was particularly true of the downturn. In the downturn, we found that there was less of private market action and there were these amazing opportunities on the public market. But this forms less than 10% of our investments and we will continue to stick to private companies and stick to our core of early stage venture investing and early stage growth investing.

The departure of all four of them will not have any impact on our strategy going forward. There is no linkage on what we have done in the past and what we will do in the future. So, Sumir &  Co. will continue to serve on the boards of Sequoia/ Westbridge and we will continue to serve on the boards of our portfolio companies. The decision makers will change but the approach and the focus will remain the same.

So, you are saying that you will continue to function in the same seamless way?

Shailendra: Absolutely. In fact, we just closed an investment yesterday putting $25 million into a new team. Its absolutely business as usual. We are making very sure that there is no loss in momentum.

In India, we are doing what we have been doing in the US which is venture and early growth. Sequoia has been doing that for the last 4- 5 years when they entered India and we will continue to do that. Doing venture is not an easy business, but we do believe that we are at an advantage considering the amount of time that we have spent here and a network of portfolio companies that we have built. We have more than six companies in the IPO pipeline which are at various stages of preparation as we speak. We believe that the next two years will be the best for Sequoia in terms of exits. The best is yet to come.

How is the organization structured now? Which portfolio/ sector goes to whom?

Shailendra: It is business as usual. There will be 5 managing directors with all of them as partners.  There is no hierarchy or a sector specific focus for individual partners. Think of it as five people who are running the business jointly and bringing to the table expertise in various sectors they have experience in. We don’t have any rigid classifications in fact we encourage people internally to invest across sectors as it makes them better investors.

How independent is Seqouia India’s capital decision making of the global franchise?

Abhay: We only made an investment decision yesterday and we don’t have anyone dialing from the US and telling us how should we make the investment. We decided to invest in the company we like.  The decision making is very independent which is true of Sequoia Capital before and now.  We often consult with Seqouia Capital US and seek their advice in specialized areas they have expertise in. Each geography is independent to do what they like and reach a decision jointly by the investment committee. So, the Chinese investment committee will have Chinese partners, Indian Investment committee has five of us and Israeli investment committee has Israeli partners. While Seqouia is a global investment firm, they have a belief that the investment making should remain local.

How are LPs reacting to this transition?

Abhay: This is something which is happening as we speak. They are gaining the confidence that the team has enough experience and knowledge to manage the transition. We want to reiterate that all of us have been involved with the company for 3.5 to 6 years and been having constant dialogue with them.  We have been attending Annual LP meetings for quite some time.

Do you think that private investing is losing its sheen with such senior people in the industry ( Dhawan, Pulak Prasad and now Sumir Chadha & team) going the public markets way?

Yes, these are very good observations with very good parallels. Public markets is very attractive to people at late stage in their careers as you can deploy a very large amounts of capital at one shot but that does not reduce the ability of generating attractive returns  for venture and growth. We have fantastic experience of this at venture and growth investing in India given our strong franchise and network that we have built in the last 6-7 years. We are very optimistic about generating consistent returns in India. Sequoia Capital is one of the few firms which has made various generational transitions in the last forty years.


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Sequoia India MDs On Transition & Venture Investing Focus

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