Mumbai: Sequoia Capitals India PartnersCaught earlier this year by governance scandals in startup companies in its portfolio, an April meeting in London assured investors that these “low lights” were mostly behind it, according to three people familiar with the discussions.
But two months later, Sequoia, a major venture capital player in India, is still grappling with complaints from startups about damaged trust and a defamation lawsuit by a former general counsel, while a ruling in closing a $2.8 billion fund. due to delay. issue.
a type of tree has acknowledged that it is facing governance challenges in India. Two sources familiar with the company’s thinking said that it has already made specific changes to governance practices, following an unusually clear blog post by Sequoia on April 17, which it said is reflecting on recent events. and will impose stricter checks and requirements on startups.
Rave nonetheless persists, including several startups in India that have not been embroiled in scandals but are concerned about them, highlighting a public relations headache for the company as it consolidates its position in the country.
The Silicon Valley firm has invested $5.5 billion in India and since 2017, has struck more than 400 deals, surpassing US-based rivals such as Accel and Lightspeed, data from Venture Intelligence shows.
“As an entrepreneur you raise money from Sequoia because of their reputation for working with founders,” said one CEO of the Sequoia-funded startup, who declined to be named to avoid damaging relationships.
He was among a dozen startups with funding and board representation from Sequoia, who said the company had not kept them in the loop about governance-related issues that were making headlines in India — and who were concerned that incidents would hit them. may also be reflected. He refused to be recognized.
Sequoia did not respond to questions from Reuters for this article.
The first major signs of governance problems at Sequoia-funded startups this year emerged in January, when digital payments provider BharatPe launched an investigation that eventually led to the sacking of several employees and uncovered vendor misconduct.
Three months later, Singapore-based fashion startup Zilingo said it had suspended its 30-year-old CEO and former Sequoia analyst cofounder Ankiti Bose over suspected financial irregularities. He was later sacked, which Bose said was a wrongful termination.
People familiar with the April London meeting said Sequoia investors did not indicate particular concern or low support for its work in India because of the events, but it suffered further downside afterward.
According to two sources and an email seen by Reuters, in May, Sequoia wrote to some of its investors asking them to raise $2.8 billion in New India and Southeast Asia funds due to ongoing governance concerns at an Indian portfolio company. is delaying.
The company did not comment at the time, although it announced this week that the fund had successfully closed.
And this month, Sandeep Kapur, Sequoia’s in-house general counsel in India for nearly nine years until 2019, involved the company in a defamation suit against media companies, which was reported on a June 2 leaked Sequoia email.
Kapoor’s firm, Algo Legal, said in a press statement that emails sent to Sequoia’s portfolio companies had made “baseless references” about the firm to “details” and were harming its interests.
The law firm said in its court filing that Sequoia was its top client at Billings, but the US venture capital firm terminated its association with it in January.
Kapoor declined to comment while the matter was before a judge. Sequoia had sought time to respond to the allegations in the first hearing of the case last week. The next hearing of the case is to be held on June 18.
According to Venture Intelligence, India’s startup sector had a blockbuster year in 2021 with fund-raising of $35 billion, but the boom has waned and governance problems are now emerging in many startups.
“It is unfortunate for Sequoia… but the problem was systemic,” said Anirudh Damani, managing partner, Earth Venture Fund of India.
According to sources familiar with Sequoia’s thinking, the company believes it took precautions during the startup boom, but now it’s more focused on governance training, whistleblower policies, audits and controls of startups, as well as communication with portfolio companies. But it is further strengthening its efforts. ,
One source said that as part of the tighter scrutiny, Sequoia wants to ensure that its well-funded investment firms have “very strong CFOs” and that startups complete financial audits on time.
Another source familiar with the matter said representatives of Sequoia had reaffirmed their commitment to invest in India and corporate governance in a meeting with Finance Minister Nirmala Sitharaman earlier this month.
The minister’s office tweeted a photo of the meeting’s participants at the time, but did not respond to a request for comment.
But two months later, Sequoia, a major venture capital player in India, is still grappling with complaints from startups about damaged trust and a defamation lawsuit by a former general counsel, while a ruling in closing a $2.8 billion fund. due to delay. issue.
a type of tree has acknowledged that it is facing governance challenges in India. Two sources familiar with the company’s thinking said that it has already made specific changes to governance practices, following an unusually clear blog post by Sequoia on April 17, which it said is reflecting on recent events. and will impose stricter checks and requirements on startups.
Rave nonetheless persists, including several startups in India that have not been embroiled in scandals but are concerned about them, highlighting a public relations headache for the company as it consolidates its position in the country.
The Silicon Valley firm has invested $5.5 billion in India and since 2017, has struck more than 400 deals, surpassing US-based rivals such as Accel and Lightspeed, data from Venture Intelligence shows.
“As an entrepreneur you raise money from Sequoia because of their reputation for working with founders,” said one CEO of the Sequoia-funded startup, who declined to be named to avoid damaging relationships.
He was among a dozen startups with funding and board representation from Sequoia, who said the company had not kept them in the loop about governance-related issues that were making headlines in India — and who were concerned that incidents would hit them. may also be reflected. He refused to be recognized.
Sequoia did not respond to questions from Reuters for this article.
The first major signs of governance problems at Sequoia-funded startups this year emerged in January, when digital payments provider BharatPe launched an investigation that eventually led to the sacking of several employees and uncovered vendor misconduct.
Three months later, Singapore-based fashion startup Zilingo said it had suspended its 30-year-old CEO and former Sequoia analyst cofounder Ankiti Bose over suspected financial irregularities. He was later sacked, which Bose said was a wrongful termination.
People familiar with the April London meeting said Sequoia investors did not indicate particular concern or low support for its work in India because of the events, but it suffered further downside afterward.
According to two sources and an email seen by Reuters, in May, Sequoia wrote to some of its investors asking them to raise $2.8 billion in New India and Southeast Asia funds due to ongoing governance concerns at an Indian portfolio company. is delaying.
The company did not comment at the time, although it announced this week that the fund had successfully closed.
And this month, Sandeep Kapur, Sequoia’s in-house general counsel in India for nearly nine years until 2019, involved the company in a defamation suit against media companies, which was reported on a June 2 leaked Sequoia email.
Kapoor’s firm, Algo Legal, said in a press statement that emails sent to Sequoia’s portfolio companies had made “baseless references” about the firm to “details” and were harming its interests.
The law firm said in its court filing that Sequoia was its top client at Billings, but the US venture capital firm terminated its association with it in January.
Kapoor declined to comment while the matter was before a judge. Sequoia had sought time to respond to the allegations in the first hearing of the case last week. The next hearing of the case is to be held on June 18.
According to Venture Intelligence, India’s startup sector had a blockbuster year in 2021 with fund-raising of $35 billion, but the boom has waned and governance problems are now emerging in many startups.
“It is unfortunate for Sequoia… but the problem was systemic,” said Anirudh Damani, managing partner, Earth Venture Fund of India.
According to sources familiar with Sequoia’s thinking, the company believes it took precautions during the startup boom, but now it’s more focused on governance training, whistleblower policies, audits and controls of startups, as well as communication with portfolio companies. But it is further strengthening its efforts. ,
One source said that as part of the tighter scrutiny, Sequoia wants to ensure that its well-funded investment firms have “very strong CFOs” and that startups complete financial audits on time.
Another source familiar with the matter said representatives of Sequoia had reaffirmed their commitment to invest in India and corporate governance in a meeting with Finance Minister Nirmala Sitharaman earlier this month.
The minister’s office tweeted a photo of the meeting’s participants at the time, but did not respond to a request for comment.