Peak XV Partners: Peak XV downsizes its $2.85 billion fund by 16% a year after Sequoia US-India split

Venture capital firm Peak XV Partners has downsized its $2.85 billion fund by 16% more than a year after it split from Silicon Valley heavyweight Sequoia Capital.

Peak XV’s eighth India and Southeast Asia-dedicated fund, among the largest corpus floated by a risk investor for this region, will see its size being cut by $465 million with the bulk of the reduction coming in its growth-stage allocation, people briefed on the developments told ET.

Announced in 2022, Fund-VIII was supposed to utilise $2 billion across its India venture and growth investments, while the remaining was for deployment in Southeast Asian companies.

Besides resizing the fund, Peak XV, formerly Sequoia Capital India, is also cutting the management fee it charges limited partners (LPs) bringing it down to 2% from 2.5% of the overall size of the fund, sources added. It will also slash the carry (profits from exits) it takes home to 20% instead of the current 30% for its growth investments. However, a 30% carry will trigger if a given fund in the growth or multistage category achieves a 3x distribution to paid-in (DPI) capital – the measure of the total capital that a fund has returned to its LPs or sponsors of funds.

The management fee and carry will remain unchanged at 2.5% and 30%, respectively, for seed and early-stage venture investments.

The changes will be applicable for all the ongoing growth funds of Peak XV Partners, and previous Sequoia Capital India vehicles since they began operations here in 2006.

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The development comes at a time when the Indian venture capital industry is undergoing a major reset as pressure to show exits and cash distributions is at an all-time high. In June, Matrix Partners India said it was going independent and rebranding as Z47 after having run as a franchise of Matrix US for 18 years.Most VC funds in India were established as affiliates of US venture capital firms, in the early 2000s post the dotcom bust. These funds have undergone significant changes in their leadership with several offshoots and splits in partnerships taking place, signalling the shift in the industry.

Also Read | Rebranding was a natural evolution for us: Avnish Bajaj on Matrix’s US-India split

Why the cut in fund size?

People in the know of the development said the slow deployment of growth capital over the past two years led to the decision to downsize the fund size.

“The firm’s LPs have been informed about the changes in fund size and fee structure…In the Indian public markets today, the venture capital industry is seeing a repeat of what happened in private markets back in 2021…companies are seeking higher valuations from private investors because they are getting those valuations from public markets. With these changes, Peak XV wants to stay disciplined in the growth stage,” one of the persons cited above said.

In a similar move back in July last year, Sequoia Capital – the US-based outfit – had pared the size of its cryptocurrency fund to $200 million from $585 million, while also slashing the size of its “ecosystem fund”, which backs other venture funds, to $450 million from $900 million, amid a broader worldwide slowdown in the tech industry.

Exits via public markets

In 2024, Peak XV, which has backed unicorn startups such as Cred, Meesho, Groww and Razorpay, has clocked over $1 billion in exits through sale of public stocks and private market secondaries, a person in the know said.

These include a $185 million stock sale from Indigo Paints, $150 million block deal in Five Star Business Finance, $73 million of liquidity through Mamaearth parent Honasa Consumer shares, and stake sale amounting to $40 million in Truecaller.

Additionally, Peak XV is in the process of finalising secondary deals in portfolio companies such as Healthkart, Rebel Foods, Finova, PingSafe and Cloudnine Hospitals.

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