Amid funding winter, Sequoia and Accel lead VC investments

Venture capital firms also faced a funding crisis in 2022, prompting them to cut back on ambitious bets. VC firms closed 1,075 deals in India in 2022 through the end of November, compared with 1,212 deals in the same period a year earlier.

However, transaction sizes saw a significant decline in 2022, despite a minor drop in the number of transactions due to a decline in late-stage financing activity. As a result, VC investments by size fell about 34% to $23.2 billion in 2022 (as of November 30) from $35.4 billion in the same period a year earlier.

Despite challenging market conditions, Sequoia has maintained its leadership position in recent years through its focus on early-stage entrepreneurship and growth deals in India and its accelerator program, Surge, which incubates and finances new start-ups. Some of Sequoia’s 2022 investments include weather-focused firm Climes, influencer platform Rigi.Club, fintech startup Hubble, and B2B sales and intelligence platform Apollo.io.

Sequoia was also the leading investor by volume in 2019 and 2020, completing 87 and 88 trades, respectively, from January to November. The venture capital firm, which has been investing in India since 2006, raised a record $2.85 billion in three funds to support startups in India and Southeast Asia, indicating it has enough capital for years to come.

Rival Accel invested in 54 startups in India through November, maintaining its position as the second most active venture capital firm in India, but closing 19% fewer deals this year. The venture capital firm also announced its seventh fund focused on India and Southeast Asia with a corpus of $650 million in March. The company’s commitment to the startup ecosystem in India and the Southeast Asia region has grown to over $2 billion thus far. Sequoia Capital and Accel did not respond to requests for comment.

Deal flow is expected to improve in 2023 from the current year, but will not reach 2021 levels, according to Kashyap Chanchani, co-founder of The Rain Maker Group, a technology-focused investment bank.

“There are no major recession concerns in India, and US inflation numbers have also improved. So, to a large extent, it is expected that towards the middle of the year (2023), there will be more business as usual. (However,) the deals will not be anywhere near what we saw last year or the first half of this year,” Chanchani said.

Pune-based Better Capital ranked third on the list of most active investors in 2022, with 52 deals this year.

“We have been extremely clear on our entry price. In 2023 (also), we will be tougher on prices,” said Better Capital founder and CEO Vaibhav Domkundwar.

Blume Ventures completed 44 transactions through November and closed its fourth fund at more than $250 million, exceeding its corpus target of $200 million.

“We invest extensively in SaaS (software as a service), financial services, climate technology and consumer businesses in 2022,” said Ashish Fafadia, partner at Blume Ventures.

Interestingly, Tiger Global made 50 deals in 2022 through November, compared to 54 for the same period in 2021, but made smaller checks this year. Tiger Global did not respond to requests for comment.

Matrix Partners was also active in India. “2022 was a better hunting ground relative to 2021, which was marked by a frenzy of investment activity in which valuations, speed and volume of transactions soared. Part luck and part foresight, we didn’t end up finding as many compelling opportunities in 2021. Some things just didn’t make sense, either from a valuation standpoint or maybe we didn’t appreciate the ideas we were looking at,” Tarun said. Davda, CEO of Matrix Partners.