A fork in the road…

We are deeply grateful to Sequoia’s Limited Partners, who have collectively committed $1.35B to two new Sequoia India funds: a $525M venture fund and a $825M growth fund. Sequoia India now operates seed, venture and growth funds, a structure that allows Sequoia to remain a relevant partner for founders at all stages of their journey. The three Sequoia India funds will continue to invest across India and SEA.

We are excited about the depth of opportunities in this region, which is undergoing a massive technology-led transformation. The start-up ecosystem in both India and SEA has come a very long way in the last few years; the market gets deeper and the crop of founders, and their achievements, becomes more impressive each year. The combined GDP of India and SEA is expected to cross $14T and the number of mobile internet users will likely cross 1.5 billion by 2030. This region will become home to a number of massive technology companies during the next decade.

While we are excited to have new funds to back exceptional founders in India & SEA, raising funds is not success.

The hard work starts now. A fundraise represents a massive responsibility to deliver attractive returns to Sequoia’s Limited Partners, the majority of which are non-profits, foundations and charities. We do this by partnering with outstanding founders who are building category defining companies. On their journey, we work side-by-side with founders; whether recruiting or marketing, building products or raising capital, we do everything in our power to help them succeed. But this has not been easy. Founders in India and SEA face a challenging, high-friction environment in which to build companies.

This year in particular has been difficult for many of us – for founders, employees, investors, and for society at large. The Covid-19 pandemic is raging on and we’re in an unprecedented humanitarian and economic crisis. It has also been a time of reflection. Where are we in the journey of the startup ecosystem in India and SEA? What type of future should we aspire for?

Covid has brought us closer to embracing some hard truths. The startup ecosystem in India and SEA has had a tumultuous journey over the last decade. During periods of exuberance, investors have rushed in to invest large amounts of capital into startups. This has, expectedly, resulted in short term over-funding and hyper competition amongst start-ups. These periods have been followed by down cycles, cost cutting and negative sentiment. These cycles have enhanced startup mortality and left many founders, investors and startup employees scarred.

Due to frequent cycles of intense competition, startups in our region have struggled to grow rapidly with good unit economics, often posting very high losses for the scale of business. This has prevented very large profitable technology businesses in our region from emerging. To add to these challenges, startups in India do not have the benefit of a regulatory framework that allows listing on foreign exchanges like Nasdaq. In this market context, most start-ups have chosen to remain private, and raising capital has become a proxy for success.

We believe there is an opportunity to choose a different path. Our ecosystem has arrived at a fork in the road.

Our markets are deepening, our founders are world class, our tech talent is formidable – but we need to hold ourselves to a higher bar. It’s time to aspire for massively large and profitable companies. It’s time to build more products that can compete globally on quality, not just on price. We need more unique and innovative startups, pursuing original ideas in addition to “X of Y” business models. We need more examples of authentic leadership, improvements in gender diversity, and inclusive, safe and nurturing work culture for our teams. In short, our ecosystem needs exemplary, enduring, lighthouse companies of the future, that can prosper for decades and be resilient across market cycles.

Ironically, the Covid pandemic has already catalyzed a massive change in almost every startup’s trajectory. Dozens of founders in our region have demonstrated outstanding leadership and agility in adapting to the pandemic. Costs have been trimmed, product roadmaps have been prioritized, new revenue levers have been unlocked and wonderful new talent has been hired. The leadership teams inside our startups are more aligned, focused and determined than ever before. We need to build on this Covid-induced state of high performance, stick to first principles, and remain relentless in our pursuit of sustainably successful companies.

While the pandemic has caused a significant course correction, a new bull cycle for tech startups could soon be on its way. Will we see another cycle of exuberance? Will our startups stay the course of fiscal prudence and disciplined execution that we have seen during the pandemic? Will the competitive zeal to build and finance the next big startup of our region, compel investors and founders to make the same choices as before?

We are at a fork in the road, and everyone has a choice to make. From our vantage point, the future of our region will be shaped by those few founders who are resolutely committed to building enduring companies with unshakable foundations. It will take a handful of exceptional founders to show us the way, to shine the light for others to follow. This blog post is dedicated to you. For all such founders who are inspired to build the legendary companies that can transform their industries and outlive their founders and early investors, we are thrilled and excited to walk alongside for years to come.

Team Sequoia India

We help the daring build legendary companies

This column was originally published on LinkedIn.