Slashing 16% of its Biggest Fund, Peak XV
The growth-stage funding to the start-up ecosystem has slowed down dramatically over the previous two years, leading venture capital company Peak XV to reduce the size of its largest fund by sixteen percent. In May 2022, the company secured $2.85 billion for its ninth fund, and it will give its limited partners (LPs) a return of roughly $465 million.
The firm is cautiously investing in its growth fund while keeping an eye on seed and venture stage opportunities, given the highly valued public market in India. Consequently, it has decided to reduce the size of its 2022 vintage funds by sixteen percent, according to a statement released by Peak XV. While maintaining the same economics for its seed and venture funds, Peak XV Partners has chosen to link a portion of its carried interest to profit distributions in its growth and multi-stage funds. The difficulties in deploying capital during the last 24 months, particularly for growth and late-stage businesses, are reflected in the downsizing.
Why It Opted for This Move?
In light of the difficulties in deploying capital over the last 24 months, particularly for growth and late-stage enterprises, and the growing compliance and governance concerns that Indian startups are facing, the firm has decided to shrink the size of its fund.
A number of businesses in Peak XV's portfolio, including GoMechanic, BYJU'S, and Mojocare, have faced serious challenges as a result of these problems. Additionally, in order to get better long-term valuations, companies have begun to look to public markets for expansion and late-stage finance.
The Move Has Been Receiving Positive Feedback
Feedback from a large non-profit LP indicates that the decision has been well accepted. There has never been more firm belief in the benefits of investing in India and Southeast Asia. Strong portfolio performance has put the company on track to have its second-best year ever for exits and dividends, according to the VC firm. According to reports, Peak XV would also reduce the management fee it charges to its investors, or LPs, from 2.5 per cent to 2 per cent for the fund.
Concurrently, the venture capitalist is withdrawing from Zomato and Mamaearth and divesting its holdings in start-ups like K12 Techno, Pocket Aces, and PingSafe through mergers and acquisitions (M&As) and secondary deals. Almost 700 companies have received backing from Peak XV Partners, an aggressive start-up investor in India that separated from US-based VC Sequoia Capital in June of last year. The enthusiasm that the Indian public markets are currently experiencing is similar to what the private markets went through in 2021 when the country created a record 45 unicorns—startups valued at one billion dollars or more—in just a single year.
Anga Mahatara
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