AVCJ Awards 2016: Venture Capital Professional of the Year: Shailendra Singh

Q: Sequoia has been investing in India for just over a decade. What have you found to be the most important consideration in this market?

A: Sequoia really tries to think of a decade-long investment process for each company, and as we reach our 10-year mark in India we find that several of our investments that are seven, eight, or nine years old are just now hitting their stride. One way in which investing in India and Southeast Asia are similar is that unlike the US and China, the likelihood of an overnight hit is much lower, so you need to have an extremely patient, long-term approach. And I think that's true of all emerging markets because there are more challenges to building a company, more friction, volatility, market swings and so on.

Q: How does Sequoia differentiate itself from other firms?

A: We try to stay away from taking too many point-in-time views. Eighteen months ago you could have taken the view that it's so hot, it's all happening. And now you might think that it's cooled off, and valuations have corrected. But really not that much has changed. In emerging markets, a handful of firms or the enthusiasm of a few individuals can create or deflate sentiment. But we are betting on the underlying growth trajectory, a very core shift to technology-led disruption across industries.

Q: How has this approach played out for Sequoia in recent years?

A: In 2015 the firm was quite fortunate. Sequoia made a careful call that when Indian markets started to get hot in 2014, rather than chasing valuations up, we would make early-stage investments in India and explore opportunities in Southeast Asia. Investments were made in Tokopedia and Go-Jek and Carousell, and a few other companies in Southeast Asia, which now all look quite promising. So at the time we decided to evaluate Southeast Asia, about three years ago, that was a terrific vintage to have started evaluating, and then the firm was actively investing in late 2014 and 2015, which were very good vintages. We adjusted to the hype cycle in India, and that helped us a lot.

Q: What role do start-up founders play in Sequoia's investment decisions?

A: Clearly founders are the center of building tech companies, because these companies have to change and evolve their strategies extremely quickly. Even fast-growing companies, early in their cycles, might see disruptive young companies come through. A large percentage of unicorn founders would tell you that rather than fearing other unicorns, they probably fear the young disrupters more. So I think the pace of change has evolved so much that you really need great founders who are not just good at what they do today, but have the power to keep changing really fast in the future. That's not easy for us to judge when we invest, but we try to evaluate founder quality as much as we can, and it's central to our decisions.

Q: What challenges do you see facing start-ups in India and Southeast Asia, and what benefit does Sequoia bring in overcoming these issues?

A: These companies exist in fundamentally higher-friction economies, and therefore it really helps founders if you can support them in different functional areas. In addition, many of our companies are going to become global much faster. This is a very big difference in our portfolio versus, for example, the Sequoia China portfolio, where companies tend to be much more internally focused. So we try to work on international business development, with go-to-market strategies in multiple countries, and with technology building. For example, one of our Indonesian portfolio companies was in India for a weekend visit. Our recruiting team and our tech team set up 27 interviews with candidates over Saturday and Sunday in two different cities so the Indonesian company could hire tech talent. These portfolio services have been a cornerstone of our founder engagement model. It's a deeper engagement model than most firms pursue, and it's meant to fit what we've found in India and Southeast Asia.

Q: India has become known as a difficult market for exits. Has this impacted Sequoia?

A: We feel that exits are a function of the quality of the portfolio. The dilemma is that there are lots of people willing to buy your stake in your best companies, but those are also the companies you don't want to sell. If you take early exits, you've put runs on the board but you'll give up material upside. So what happens is, if the market is not so fertile from an exit standpoint, then it becomes quite hard to exit the second or third quartile of portfolio companies. But you don't want to sell your first quartile companies, you have a little bit of a chicken-and-egg dilemma.

Q: What do you see as productive exit routes for your Indian companies?

A: This year has been very strong for Indian public markets. We've seen three Sequoia India companies go public, and two more that have filed. We've also had multiple M&A events in the portfolio. A lot of global strategic players are making minority investments in Indian tech companies: Tencent Holdings recently led an investment in Practo, Alibaba Group has made investments in Paytm, and Ford invested in Zoomcar, and so on. I think we are seeing the first phase of forays from the international big balance sheets, where they're buying minority stakes. As they get more comfortable and build a stronger conviction around the market, I think many of these minority investments have the potential to lead to full M&A.

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• Topics
• South Asia
• Technology
• Early-stage
• Sequoia Capital
• Venture
• AVCJ Awards
• India