Sequoia Capital’s powerful MD has an unenviable image in India’s start-up sector. However, the controversies surrounding many of investee companies have brought into focus the role and games VCs play in the start-up ecosystem
Heavy lies the head that wears the crown. Sequoia’s MD for India and Southeast Asia Shailendra Singh must be feeling the weight of being the all-powerful man in the company where his decision is often the final word when it comes to funding decisions.
Holding Sequoia’s purse strings did come with its share of benefits—Singh helmed the disbursement of big-ticket cheques to start-ups, be it for BharatPe, Apna, Byju’s or Zomato. The company has been among the leading backers of India’s start-up ecosystem, increasing its portfolio of investee companies year on year.
Market research firm Venture Intelligence claims that Sequoia participated in 50 deals in 2018. In 2019, this almost doubled to 94 and stayed in the same zone at 93 in 2020. A year later, this touched 110 in 2021, the same year India produced a record number of unicorns. In 2022, when the funding winter started seeping into the country, Sequoia still participated in 74 deals.
During his 17-year-old stint at Sequoia, Singh’s name was taken with respect by aspiring entrepreneurs who felt that having his backing would earn them the golden ticket to unicorn status with greater ease. And they had good reasons for this belief.
He was noted as the man who is known to have a penchant of “taking asymmetric bets to give outsized returns”, as one tech start-up founder informed Outlook Business. Singh led successful investments in companies like Unacademy, Oyo, Zilingo, GoMechanic, Pine Labs, Cred and Druva, which became the toast of the start-up town.
Except that things soon started unraveling as cases of corporate misgovernance cropped up in many of these companies over the past few years. As probes of these irregularities intensified at Sequoia’s investee companies, curiously, Singh’s name was the one that stood out in the spotlight. This is even more surprising since Sequoia India and Southeast Asia has 11 managing directors and five principals in roles directly involved in company investment decisions.
Is it because Singh is considered the first amongst equals with these peers? Or is it because he has gained a larger-than-life cult image in the VC universe, which puts him in the crosshairs of any issues that crop up in Sequoia’s portfolio companies?
The answers to these questions are hard to ascertain. However, it does appear that the law of averages is catching up with Singh. After placing high-risk bets on start-ups that touted revenues, instead of speaking about profitability, some public relations disasters were waiting to occur.
While earlier instances of due diligence lapses could be brushed off as one-off misdemeanors, the steady string of start-ups with corporate governance failures is now begging the question—how complicit are VCs when their investee companies are on the wrong side of the law or morality?
Sequoia has been stoically maintaining its “zero tolerance towards proven wrongdoing” for a while. However, will it put its money where its mouth is and put corporate governance guardrails not just at its portfolio companies but within its organisational structure too?
Read how the tears are showing in the invincibility cloak that many VCs believe shrouds them in the cover story of Outlook Business March issue: Sequoia Stuck Between Start-Up Frauds And Controversies.