Peak XV Partners cuts $2.8 bn fund by 16% on mkt valuation concerns

Venture capital firm Peak XV Partners, formerly known as Sequoia India and Southeast Asia, has announced a 16 per cent reduction in its 2022 vintage fund as part of a strategic shift towards investing in a “measured manner” amid elevated valuations in the Indian market.

The $2.85 billion fund will be cut by $465 million, reflecting the firm’s adjustment to market conditions while maintaining a strong focus on long-term investments in the region.

“We are defined by the choices we make. We have made voluntary changes that we believe will serve us well in a multi-decade time horizon,” it stated in a statement. “In the context of a richly priced public market in India, we are investing in a measured manner in our growth fund, while we continue to lean in on seed and venture stage opportunities,” it added. 

The firm underlined its long-term commitment to India and Southeast Asia, citing strong portfolio performance and an optimistic outlook for the region. Despite trimming its vintage fund, Peak XV Partners remains focused on early-stage investments.

While adjustments have been made to the firm’s growth and multi-stage funds, particularly in terms of carried interest tied to profit distributions, the economics of its seed and venture funds will remain unchanged, said the statement. Indian startups raised $7.5 billion in venture capital (VC) funding across 780 deals between January and August 2024, a 53 per cent surge in funding value and a 5.1 per cent increase in deal volume, against the same period last year, according to data from GlobalData.

Globally, the country ranks among the top five markets for VC activity in both deal volume and value. Between January and August 2024, India accounted for 7.3 per cent of global VC deals and 4.6 per cent of the total funding value. “While this may be contrarian to market exuberance, this will serve our founders and LPs well in the long term,” Peak XV Partners said, suggesting that the move is aligned with a strategy to prioritise long-term stability over short-term market trends.

Peak XV also lowered management fees to 2 per cent on three of its growth and four multi-stage funds, according to Bloomberg News. 

Downshift 

> Reduction a part of strategic shift towards more ‘measured’ investments due to elevated valuations in the Indian market

> Management fees were reduced to 2% on three growth funds and four multi-stage funds, with carried interest lowered to 20% for these funds

> Firm to continue to focus on seed and venture-stage investments while making adjustments to its growth and multi-stage funds

> Peak XV’s move is aligned with a long-term strategy prioritising stability over short-term market trends