Lightspeed raises $275 million India fund

BENGALURU: Top Silicon Valley venture capital firm Lightspeed has closed its third India-focused fund at $275 million as it looks to double down on startups across the country. The new fund comes on the back of the firm’s record exits from unicorns (startups valued at over $1 billion) like Oyo and Byju’s in 2019, delivering cash returns of over $900 million between the two deals.
It also comes two years after it raised $175 million for its second fund. Lightspeed — which is known as an early backer of messaging app Snap and software co MuleSoft (acquired by Salesforce for $6.5 billion) in the US — has invested $700 million in India.
“It wasn’t clear 5-10 years ago if India can create companies worth over $500 million to $1 billion to make good venture returns. But now, the confidence is higher that the market size does support companies of this scale and value. And the entrepreneurial quality is also much higher now,” said Bejul Somaia, partner at Lightspeed.
More than 80% of the capital invested by Lightspeed has been in early stages, in seed and series-A rounds, while it also invests at late-stage levels from its global funds, which raised $3 billion earlier this year. Lightspeed’s other portfolio companies in India include Udaan, a business-to-business commerce platform valued at $2.8 billion, and vernacular social network ShareChat, which is backed by Twitter. It has also been an early backer of enterprise software startups like Innovaccer and DarwinBox.
It is seeing an increasing number of startup ideas coming from smaller towns, which will also get a boost from the adoption of remote work due to the Covid-19 pandemic. “When we did our first Extreme Entrepreneurs in 2018, we got applications from 49 cities. The very next year we got applications from 101 cities. I just think this is blowing up in a very non-linear way and you’re starting to see 100% distributed teams,” said Vaibhav Agarwal, partner at Lightspeed.
Lightspeed’s latest fund comes at a time when several other large new funds have also been closed, highlighting that despite the Covid-19 pandemic shrinking global economy, capital flows in startups is not expected to dramatically slow down. TOI reported last month that Sequoia has raised $1.4 billion for India and Southeast Asia. Tiger Global Management, which was one of the most active investors in India in 2019, also closed a new $3.8-billion global fund.A report from Bain & Co said that dry powder available for investments in startups in India has reached a record high of $7 billion in 2019, from the previous high of $6.1 billion in 2018. The report added that India remains one of the most attractive emerging markets for venture capital among LPs, after Southeast Asia and China.