Palihapitiya, who runs venture fund Social Capital, said while Sequoia’s exit from China was understandable, the firm could have let India operations stay attached to it.
Sequoia Capital split itself into three– with the India and Southeast Asia firm being rebranded to Peak XV Partners under Shailendra Singh, while the China entity will be rebranded to HongShan, helmed by its star dealmaker Neil Shen. The firm will continue to run Sequoia Capital US, headed by Roelof Botha, along with its European operations.
“China is largely uninvestable for the next 30-40 years. So it makes sense to jettison…I was surprised about why they would allow India to leave,” Palihapitiya said on All-in podcast, which he co hosts with Jason Calacanis, David Sacks and David Friedberg.
He said that Shen, who he considers to be “elite” by the definition of an investor who has made over a billion dollars in exits and returns “will do just fine running the Sequoia China business” but said that there was nobody who was “elite” in Sequoia India.
“India is a country growing at 6% a year…I’m not sure why you would let them leave… you would want to attach them to yourself because it makes the US business look better because you probably get differentiated ,” he said on the All-In podcast.
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“Sequoia India, I don’t think has much to talk about. And so maybe what Roelof ( Botha) decided this team is just not very good. So we might as well just cut it and we can revisit it later. They probably have some number of years of a non-compete and then they could come back into the market five years with a totally new team and that may be easier. It’s hard to process returns from two totally different funds, right..,” he said. Palihapitiya – the former Facebook executive, currently has a number of lawsuits filed against him by investors who got burned following his unsuccessful push for special purpose acquisition companies (SPACs), or blank-cheque companies – also did not agree with Sequoia Capital’s rationale that its portfolio companies facing conflict was one of the reasons behind the split. “That happens in the United States. Sequoia has always been known to fund everybody that they think will make money no matter how much they compete, no matter where they are. Sequoia as an organisation is elite. They’re there to make money for their LPs (limited partners),” he said.
In an emailed interview with ETtech, Peak XV managing director Shailendra Singh, said with the split, the investment firm will reduce cross-border portfolio conflicts. “For example, prominent Sequoia India SaaS companies like Druva, Clevertap, Sirion Labs and Atlan Data have all had this issue, where there is a Sequoia Capital portfolio company that competes with them. As the India to global SaaS ecosystem grows rapidly, we expect this issue to become more difficult over time. Now, with separate brands, we can avoid this issue,” Singh had said.
Palihapitiya, speaking during the podcast, pointed out that the reasoning was being given “to hide the fact that this is an organisation that’s had some missteps”. “They’re not on solid ground, they’ve lost a lot of money and they’re trying to figure out what to do next. However, if I was running that organisation, I would have probably done nothing. And just let the dust settle,” he added.
Sequoia Capital globally, prior to the split, had about $56 billion in assets under management.
Over the last 17 years, Sequoia India and Southeast Asia raised 13 funds and invested in over 400 startups in the region, with over 50 companies valued at $1 billion. Its portfolio has seen 19 initial public offerings and merger & acquisition deals, resulting in $4.5 billion of realised exits so far. Its latest fund for the region, at $2.85 billion, will continue to be deployed under Peak XV.
Currently, the India & Southeast Asia entity has $9 billion worth of assets under management, having backed some of the top consumer internet startups in India, including Razorpay, Ola, Cred, Byju’s, Unacademy, Mamaearth and Pine Labs. The firm has dry powder, or uninvested capital, of $2.5 billion, which it will deploy in startups across the India and Southeast Asia region.