Bejul Somaia, the founder of Lightspeed India, has steadfastly defended the allure of the South Asian investment landscape, even in the wake of troubling moves such as Sequoia’s decision to isolate its Indian venture.
“The startup and venture model is based on learning and adapting quickly, navigating to the next level and understanding that the few companies that truly succeed advance economies and humanity and create tremendous value,” Somaia wrote in an essayposted on Twitter.
“And those who fail contribute to a cycle of creative destruction that is essential to the development of an innovation economy. India’s potential remains incredibly attractive: a sizable market, high quality founders and unilateral adoption of technology. The question is not whether there is potential, but how you can best utilize that potential.”
Somaia’s comments follow escalating criticism from certain industry figures who expressed open skepticism about Sequoia’s decision to scrap the India and Southeast Asian arm. The legendary venture firm said earlier this month that it plans to separate its Indian and Chinese operations from its U.S. parent ship, a move that has sparked heated debate in the industry.
Chamath Palihapitiya, the billionaire founder of Social Capital, said he was surprised by Sequoia’s decision to split up its Indian operations. “I was surprised why they would let India leave,” he said on his podcast All-In last week. “India is a country that is growing at an annual rate of 6%. It literally looks like China in 2008-2009. I think you’d want to tie them to yourself because the US company looks better.
Palihapitiya said he disagrees with the idea — the company’s official justification — of Sequoia splitting up the company over portfolio conflict concerns.
“Sequoia China has honestly been just as good or probably better than Sequoia US Sequoia India for the last 15-20 years, I don’t think there’s much to talk about and what Roelof (Botha, Managing Partner at Sequoia Capital) maybe decided was that this team just isn’t very good, so we might as well call it quits and revisit it later.
Sequoia India and SEA, the region’s most prolific investor, have raised $9.2 billion across 13 funds over the past year and a half and supported more than 400 startups. The firm, now known as Peak XV Partners, has made $4.5 billion in completed exits.
Lightspeed India, which also started investing in India more than a Decade Ago, has so far raised $1.6 billion and returned about $1 billion to its limited partners and the value of its current asset holdings is $3.4 billion, said Somaia.
“India is not for the faint hearted. India is tough. But India is worth it,” he wrote.
India has gradually emerged over the past two decades as a major overseas market for venture capital and private equity investors, who have scoured the world for substantial growth markets. While Indian startups have raised more than $75 billion in funding over the past 15 years, there are few meaningful exit opportunities for investors.
Tiger Global partner Scott Shleifer echoed a similar sentiment earlier this year. India is likely to deliver the highest equity returns globally in the future, he said, but he admitted that the world’s second-largest internet market had historically delivered below-average returns for the investor giant and that the local startup ecosystem has struggled with investment challenges. fields of governance and business economics.
“Return on capital in India is historically poor. If you look at the leading internet companies, be it Google, Facebook, Alibaba or Tencent, the revenues for them became greater than the costs more than a decade ago. You had a great legacy over the past 17-18 years of materially profitable internet businesses. So the returns on stocks on the Internet became very high and the returns to investors were very high. But that didn’t happen in India,” he said.
