Also in this letter:
■ Usage fee on OTTs: Telcos dismiss net neutrality argument of IAMAI
■ Deepinder Goyal sees Zomato making over $1 billion profit in 7-8 years
■ Corporate India skilling staff on war-footing to stay ahead
Exclusive: Sequoia’s Shailendra Singh on corporate governance, VC accountability, frothy valuations and more
Shailendra Singh, managing director, Sequoia Capital India and SEA
Hello, this is Samidha Sharma in Mumbai. Today we have an in-depth interview with Shailendra Singh, managing director, Sequoia Capital India and Southeast Asia. I have tried to compress our two-hour-long chat into some broad topics which have been at the centre of all conversations around Sequoia, Singh and their portfolio firms.
It will be an understatement to say that the last one year has been turbulent for Sequoia, mirroring the fate of many tech companies which came off the highs of the manic bull run which lasted throughout 2021.
I sat down with Singh, who helms the Sequoia operations in this region and has been the face of the firm for over a decade. We have been wanting to do this for a while, so I had much to ask… Some quick takeaways.
What’s the one big thing? While Sequoia is tightening governance processes across its portfolio companies, like putting a whistle-blower policy in place, conducting hundreds of diligence and audits, Singh said the attempt is to make this a collective effort among all stakeholders.
“The one thing that the VC (venture capital) industry can collectively do a lot better is aligning amongst themselves…. If we say please institute four more kinds of governance because we say so, other people are going to say that maybe this is not stage appropriate, or founders may push back or whatever. But only if multiple VCs act together, then we will be able to persuade founders to somehow change some of these practices. We are trying to bring this up with the Indian Private Equity and Venture Capital Association (IVCA) and with other VCs in the ecosystem. Because the truth is that the ownership in all these companies is highly fragmented– one of the repercussions of a bull market.”
Where is VC accountability in all of this? Singh said that Sequoia has executed 740 diligences in the last four or five years across India and Southeast Asia operations. “We have 475 active companies, and 600 companies in which the fund has invested in 17 years of being here. The first thing is a very big macro picture of how many diligence we run, what percentage of the diligence this represents and so on. In the past, when we did very small seed cheques, with two people who have just put together their company four months ago and have spent a total of Rs 10 lakh or Rs 15 lakh, we don’t do financial due diligence, but we still do background checks on the founders…”
Tighter control for bigger firms: “I believe we have to pursue pragmatic governance, with greater governance for bigger companies. If you are pre-IPO, $50-million plus revenue, you should have more independent people, internal and external auditors. You should have more disclosures around related party transactions. And then there are companies that are very small, with two people just building their product and surviving, trying to find product market fit, you probably want to do much lighter governance.”
State of the market: “We are pretty active in seed and venture, with the exception that there are fewer Series As happening in general and markets are less competitive, prices are a little bit more rational. In some cases, sizes are slightly smaller. I don’t think something has fundamentally changed in the early-stage market, the growth market has changed a lot more. And also what happens, and it’s true of every cycle and especially this cycle. The Series A of today is a little bit more developed than the Series A of 2021.”
Growth-stage slowdown: “The other thing that changes in such markets is a lot of global funds, which also invest in India tend to not invest in new regions at this time, we are seeing that again in the cycle. Across all stages. India dedicated funds are still active. Non dedicated funds are much less active, even in growth.”
Down rounds coming? “Founders are better off doing a down round (raising capital at a lower valuation compared to previous round). I always tell founders, if you were a public company, your stock would be worth less, so it’s just reflective of reality, why not embrace it? But some founders argue saying it brings about negative publicity and that it’s better to hold on to their previous valuation as it would be bad for the company.”
A tech platform to process user complaints against social media companies
The government has set up a technology platform that will automatically segregate the complaints – made to the government-appointed Grievance Appellate Committees (GACs) – and escalate those that require intervention to its three sub-committees.
Catch-up quick: In January this year the Centre had announced the establishment of three grievance appellate committees (GACs), based on the recently amended Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. The idea was to give users grievance redressal avenues, apart from courts where it is a time-consuming process.
How will it work? The system will consist of three committees. One of them will deal with national security, while there will be another one for content and the rest of the complaints will go to the IT ministry, an official told ET, explaining the structure.
Each committee will have an ex-officio chairman, two permanent members as well as two people who will be appointed in the Project Management Units (PMU), all in anticipation of a large number of complaints coming in. Following this, members will give their opinion on the matter and the chairman will discuss, deliberate and give a final verdict on the issue.
The government said the GAC would address the user’s appeal within 30 days.
Usage fee on OTTs: Telcos dismiss net neutrality argument of IAMAI
Major telecom companies, including Reliance Jio, Bharti Airtel and Vodafone Idea, have opposed the argument that a usage charge by them on over-the-top (OTT) communication services providers, or communication apps, hampers net neutrality. Their views came through the Cellular Operators Association of India (COAI), the industry body.
What are the telcos saying? COAI argued that telcos invest heavily in acquiring spectrum and setting up and maintaining networks over which the OTT services reside and operate, hence levy of a fee is justified. It added that a lot of these services, many owned by non-Indian entities, are charging users for verified accounts, and using consumer data collected to sell advertising.
Dismissing the claim that the levy would affect net neutrality, COAI pointed out that net neutrality pertains to non-discriminatory treatment of content which has no connection with the usage fee issue.
IAMAI’s stance: The telcos have come out with their view days after the Internet & Mobile Association of India (IAMAI) opposed such a levy, arguing that it goes against the principles of net neutrality.
Tech giants Amazon and Meta, which operate OTT services including streaming service Prime Video and messaging OTT service WhatsApp, are members of IAMAI.
ET Ecommerce Index
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Deepinder Goyal sees Zomato making over $1 billion profit in 7-8 years
Deepinder Goyal, CEO, Zomato
“The way we see the business growing and changing in terms of scale and profit, I think we can easily be a billion dollars plus in profit in seven-eight years. But who knows, fingers crossed,” said Zomato CEO Deepinder Goyal.
On recent exits: “We have about 175 people who have spent more than eight years with us. So, we do not have an attrition problem inside the organisation. Outside of the timing issue, which was like three-four people in like three-four months, it is all normal here.
In the last couple of months, Zomato has seen several top-level exits, including co-founder and chief technology officer Gunjan Patidar, cofounder Mohit Gupta, head of new initiatives Rahul Ganjoo, and vice-president and head of intercity legends service Siddharth Jhawar.
On business slowdown: “I do not think that it has hit a mature curve, it was a temporary two-three month phase. We also said in the last letter that we think that we are almost back in action in terms of growth. I think this market should grow 10-20X over the next decade,” Goyal said.
Zomato asks for higher commission: ET exclusively reported that Zomato is seeking a 2-6% increase in commission charges from its restaurant partners which have triggered a conflict. Restaurant partners have not agreed to the Zomato demand. The National Restaurant Association of India (NRAI) president Kabi Suri said the matter will be taken up with Zomato.
Tweet of the day
Corporate India skilling staff on war-footing to stay ahead
Indian corporations are rapidly upskilling their workforce to enhance agility and future-readiness in an evolving digital landscape that demands quick adaptability. Companies are heavily investing in employee skill development, and as a result, have increased their annual learning and development (L&D) budgets by as much as 100 per cent.
How are companies upskilling? Various options are available for employee upskilling, including in-house platforms and institutes, facilitated training sessions, gamification, group and individual coaching, self-paced learning programs, and collaborations with leading engineering colleges and business schools. These options cover a range of areas, from digital technology and sustainability to people management and leadership.
Who all have taken the lead? Companies such as Larsen & Toubro, InMobi, Vedanta Group, P&G, and Castrol are among those heavily investing in upskilling their workforce.
L&T has over 18 specialised training institutes, while Inmobi is targeting upskilling in the areas of AI, machine learning, automation, and analytics. Castrol has established global partnerships with INSEAD, Degreed, Coursera, and LinkedIn Learning to facilitate employee skill development. At P&G, employees, across the board, are exposed to at least five learning opportunities every quarter, presented in various formats.
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PhysicsWallah, Utkarsh Classes form JV: Edtech unicorn PhysicsWallah has formed a joint venture with Jodhpur-based Utkarsh Classes to leverage each other’s core competencies and jointly foray into new exam categories.
New security mechanisms rolled out for Aadhaar-based fingerprint authentication: The Unique Identification Authority of India (UIDAI) on Monday rolled out a new security mechanism for Aadhaar-based fingerprint authentication, and faster detection of spoofing attempts, the Press Information Bureau (PIB) said in a statement.
Industry leaders expect continued demand for digital transformation: Clients have not yet paused their digital transformation journeys and near-term demand is expected to continue, industry leaders said, despite a focus on cost-cutting and reprioritisation of spending globally.
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Illustration and graphics by Rahul Awasthi
