VC Exodus: Peak XV Partners Executives Depart to Launch New Venture Capital Firm
In a significant development within India's investment landscape, three managing directors at Peak XV Partners—formerly known as Sequoia India and Southeast Asia—have abruptly resigned. Ashish Agrawal, Ishaan Mittal, and Tejeshwi Sharma are set to establish their own venture capital (VC) firm, a move that has sparked widespread discussion across investment circles.
A Familiar Pattern in the VC World
This departure is not an isolated incident in the venture capital industry. Historically, senior executives have often branched out to create their own funds. For instance, back in 2015, when India's startup and VC ecosystem was still nascent, three senior executives left Helion Ventures to found Stellaris Venture Partners. Similarly, in 2023, Orios Venture Partners witnessed two executives exiting to pursue independent ventures.
"They constitute around 30% of various VC funds. VC fundraising has become easier as the asset class has become mainstream," noted Siddarth Pai, founding partner at 3one4 Capital, highlighting the normalization of such transitions.
Enhanced Capabilities for Fund Formation
What distinguishes the current scenario is the increased capacity for VCs to launch their own funds. High net-worth individuals and family offices are now actively seeking opportunities to invest in promising tech startups, often preferring to collaborate with or support emerging VC funds. Additionally, governmental initiatives have provided a substantial boost to the industry's growth.
The Sidbi Fund of Funds, established with an initial corpus of Rs 10,000 crore, has offered crucial support by backing VC firms, thereby facilitating investments in startups. Another fund of similar magnitude was announced last year, further strengthening the ecosystem.
"Compared to a decade ago, there is materially more capital available for technology in India. The perception of tech businesses has matured, and public markets are more receptive to tech IPOs," explained Anup Jain, who, alongside Rajeev Suri, left Orios Venture Partners to launch BlueGreen Ventures in 2024.
Drivers Behind the Trend
Several factors are fueling this trend of VCs striking out independently:
- Capital Availability: There is a significant influx of capital into India's tech sector, making it easier to secure funding for new ventures.
- Investor Interest: High net-worth individuals and family offices are increasingly drawn to tech startups, providing a ready pool of limited partners (LPs).
- Successful Exits: Profits from large deals and successful exits empower investors to reinvest in new funds, creating a cycle of growth and innovation.
Challenges in Fund Establishment
Despite the opportunities, launching a new fund presents its own set of challenges. Investors typically focus on generating returns rather than managing the complexities of fundraising and compliance. "Those GPs (general partners) who have had prior experience at handling investor relations, fundraising, and compliances in addition to purely investing have an easier ride than those who have only done prior investing," Jain pointed out.
Nevertheless, many VCs are taking the plunge, leveraging their experience in scaling startups, delivering successful bets, and accessing LP networks. The recent exits at Peak XV Partners, as publicly stated by MD Shailendra Singh, were attributed to disagreements over economics and payouts, underscoring the personal and professional dynamics at play in such decisions.
This evolving landscape signals a maturing VC ecosystem in India, where experienced professionals are increasingly empowered to forge their own paths, contributing to the diversification and growth of the startup funding environment.
