Sequoia invests in early stage startups in India and Southeast Asia

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Recently On a winter morning in New Delhi, Rajan Anandan and Pieter Kemps were walking the floor of a five-star hotel, asking more than two dozen young startup founders about their goals. A founder has his eyes set on getting more downloads in the mobile gaming category. Another promises $100 million in annual recurring revenue within a few years.

“When you think about how much you want to make, don’t think about $100 million or $200 million in revenue, she’s completely quiet now,” Anandan told the audience.

“What kind of company are you building; that never matters. There is no sustainable company on the planet that has $100 million in revenue. A sustainable company is one that generates $100 million in free cash flow a week,” he said.

Sequoia’s partners walked the founders through more than a dozen slides, emphasizing that long-term consistent growth — even if it hasn’t increased by more than a quarter — can lead to trillion-dollar companies.

Underpinning their strong belief is a bet that India and Indonesia and other South Asian markets will double and triple GDP in the next 10 to 15 years, and that public markets and technology companies will play a big role in that growth.

The combined market value of the top five tech companies in the US is more than $7 trillion, contributing to more than a quarter of the country’s GDP. The top five tech companies in China, with a market capitalization of more than $1 trillion, contribute 7 percent to the country’s gross domestic product. But the top five technology companies in India and Southeast Asia have a market capitalization of only $140 billion, which is only 2% of the GDP.

The 12 startups gathered in the presentation hall were selected from about 3,600 applicants for Sequoia’s four-year-old startup-focused Surge program. The Surge launches two cohorts each year, featuring 10 to 20 startups.

The new team features startups working in a wide range of areas: Calyx Global It is helping businesses choose better carbon credits and rethinking the rating system. Arintra It’s an AI-powered autonomous medical coding platform to help America’s hospitals automate their insurance claims processing and get better and faster payments. to boil Making it easier for couples to access wedding-related services; danger It is a curated marketplace for high-quality home products; AltWorld Gen Z is building a gaming platform to help gamers create custom 3D worlds. And Bitfrost AI is building virtual worlds and synthetic datasets that teams can use to train their models for applications.

Who said it? Offers custom, affordable products and services for a variety of health and beauty needs. Masterchow He wants to help people prepare Asian dishes at home; Wearables It is trying to pioneer the development of low-cost, clean and highly scalable lithium-ion batteries for recycling. RedBrick AI It is a SaaS platform to help companies build medical imaging AI; Question It wants to help developers and QA engineers test and debug web applications in real time. And About children A parenting ecosystem is building in Indonesia.

The sessions on Thursday morning, hosted by TechCrunch, are among a few dozen Sequoia partners these founders will participate in over the coming months as they walk through the different aspects of building a startup. Workshops teach founders how to think about the overall accessible market. It gives them guidance on putting together a technology architecture. Another helps them build mental models to shift from chasing growth to improving unit economics. And there’s a session to help founders outline the vision and tagline for their companies. (In a few words, explain the problem you’re solving and how you’re going to solve it, and don’t make things boring, off-brand, or long.)

For more than 50 years, Sequoia has “coded” its learning to assess the areas a founder might need help with on their journey and the paths they might encounter, Anandan said in an interview. The company’s massive resources – there are about 30 people who work diligently with these founders for months, helping them in many areas – set them apart from their competitors in India, even at the Indian startup stage. There are very few companies operating in India that have a very large team in India, let alone a single focus.

Sequoia doesn’t need to work that hard to win first-tier deals: It started investing in India a decade ago and has 38 unicorns in the country (102 in total) and 11 in Southeast Asia. So what is a change of heart?

In the last eight years or so, many companies have tried to tackle the early stage investments in India. Y Combinator gained momentum in the South Asian market after a few successful early picks like Meesho, Razorpay, and Clear, although its growing casting network has seen less results in recent years. Bloom Ventures and Arkham Ventures have earned a reputation for being founder-friendly and have raised large sums of money, backing many startups that have missed out on big funds. Tanglin Venture Partners, Antler and Good Capital have secured their position in the market.

“Sequoia was seen as a Series A and B investor back in the day,” said one senior investor, who previously competed with Sequoia. “The seed wasn’t a big focus for them, but they wanted to get in early as deals started to price out in the market.” In Anandan, they have invested over 100 in their personal capacity and have got a Google credential to boost their efforts, another investor said.

An angel investor, who also asked to remain anonymous to speak candidly, said Sequoia’s Surge Indian and marine vehicle response to Y Combinator is an American accelerator in several ways.

Since last year, YC has been giving startups $500,000, of which $125,000 will get 7% equity in the startup and the rest will be invested in Safe Note, which will be converted into equity in the next round of startups. Sequoia, on the other hand, is offering up to $3 million.

“Sequoia’s offerings are boutique in terms of resources, support, and unlike YC, Sequoia is consistent in not selecting multiple startups working on the same thing in the same batch, and keeps the team size fairly small and diverse. So if you choose YC, you will have a different feeling when you are chosen by Surge vs,” said the investor.

To be sure, while Surge appears to have a much larger strike force than YC in India – Surge portfolio companies include Doubt, Scaler, Catabook, ShopUp, Bejack, ClassPlus, Hevo Data, Invideo, Juno, Bukucas, Atlan, Lambdatest, Plum, Absolute, ApnaKlub is one of those that have raised several rounds – yet to crush the unicorn. (A portfolio of startups has raised more than $2 billion in subsequent financing rounds, according to the firm.)

But over the years, as many investors have acknowledged, Surge has outperformed its rivals.

“They have built a great brand. Sequoia and Surge are the first choice for startups to raise capital. They have high-quality programs, they promise to network with the best, and they generally have a great support team,” said the first investor, who, like others, requested anonymity to speak out.

Anandan — and, indeed, many other Sequoia partners over the years — has always discounted the idea that his company is trying to compete with YC on seed deals. “We have great respect for them,” he said in an interview.

Sequoia’s rivals in India, Lightspeed and Accel, two of the more competitive venture funds, have tried to build their own Surge rivals but have failed to create similar inroads.

What made the Surge the distance it is? After several attempts, here’s the best I can get out of Anandan: “You need to have a commitment to very high quality resources. We have invested more than most venture firms through Surge alone. And killing is the easiest thing to talk about, but the hardest thing in life and business.

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