Sequoia Capital India is announcing its second $ 195 million seed fund

Sequoia Capital India has closed a $ 195 million seed fund to support promising entrepreneurs across India and Southeast Asia, the venture capital firm announced Thursday.

This is the second such fund – the first was in 2019, when the company raised around $ 200 million.

Seed money is usually the first round of official money that entrepreneurs raise in exchange for equity.

As part of a program called Surge, Sequoia is providing seed capital of up to $ 2 million in addition to community access to help new start-ups build their business.

A growing number of Indian Indians are expected to launch major public offerings this year, according to Rajan Anandan, managing director at Sequoia Capital India who oversees the Surge program.

“2020 was indeed a story of two halves. The first half was very challenging,” he told CNBC’s “Street Signs Asia” on Wednesday, a day before the funding announcement. He cited the months-long national lock in India due to Covid-19, which pushed the economy into a technical recession.

“In the second half, we saw a very strong recovery – driven by both the acceleration of consumer acceptance and the industry of digital technologies as well as companies becoming much more prudent with the cost structures. them, “said Anandan.

In the first three months of 2021 businesses began accelerating revenue growth, increased customer adoption and in the early stages, better quality of entrepreneurs supporting the companies, he said. .

“In many ways, 2021 is going to usher in the beginning of a new era for India’s start-up ecosystem, where we are going to start seeing big, important IPOs in our ecosystem,” Anandan said.

Although India started through difficult times last year, the industry has emerged healthier, according to Anandan. There is more it placed a tight focus on cost structure and “remarkable innovation” taking place across a wide range of sectors including education technology, financial technology and digital health, he said.

India currently has 39 start-up businesses valued at $ 1 billion or more – often referred to as unicorns, according to Venture Intelligence, which oversees the finances and valuations of private companies. . Three of these companies achieved their status in 2021, the company said.

As a result of venture capital, which is an asset invested in high-risk projects for higher yields, the number of new businesses has increased in the last decade. They currently make up about 10% of new start-ups in India every year, according to a report on an Indian start-up by Swiss investment bank Credit Suisse this week.

“The rise in private equity flows for Indian companies has been so great that private market fundraising has outpaced public market affairs in every year of the last decade,” Neelkanth Mishra, Asia’s co-head of strategy Pacific and Credit Suisse’s India equality strategy, he said in a presentation.

The rapid rise in smartphone ownership has brought internet connectivity to the masses and a sharp decline in data prices has led to a sharp jump in data usage in India – especially for mobile data, according to Mishra.

Anandan Sequoia explained that Indian startups will have two unique opportunities: First, with more internet users in India, Sequoia expects domestic companies to make for billions of connected users in the country by 2025.

“The next opportunity for Indian entrepreneurs is to build for the world,” he said, adding that the first wave of new business start-ups that are in place are Commodity- software as a service, where some build and sell software to businesses around the world.

The next generation of companies will move beyond business software and into direct consumer products as well as financial services and fintech, where companies will launch from India to serving the rest of the world, according to Anandan.

“Given India’s place in the world, we believe that the second access, which can build for the world from India, is going to be very exciting across the five. or the next 10 years, “he said.

– CNBC’s Naman Tandon contributed to this story.