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Sequoia India grapples with fallout from governance snafus

  • Sequoia-funded India startups hit by governance lapses
  • Sequoia has bolstered governance practices, records sharing
  • PR complications in India follow lawsuit, fund delay
  • Sequoia’s India woes allotment of shakeout after startup enhance -professionals

MUMBAI, June 17 (Reuters) – Sequoia Capital’s India partners, caught out early this year by governance scandals at startup firms in its portfolio, assured traders at an April assembly in London that these “lowlights” win been largely in the inspire of it, per three folk accustomed to the discussions.

But two months later, Sequoia, a essential mission capital participant in India, is silent grappling with complaints from startups about damaged belief and with a defamation lawsuit by a worn total counsel, while the closing of a $2.8 billion fund become delayed on account of a governance topic.

Sequoia has acknowledged it faces governance-linked challenges in India. Two sources accustomed to the corporate’s pondering said it had already made explicit adjustments in governance practices, after an unusually frank blog put up on April 17 by Sequoia that said it become reflecting on contemporary incidents and would impose stricter checks and necessities at the startups it funds.

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Grumbling nonetheless persists, including amongst many India startups no longer ensnared by scandals however eager by them, highlighting the final public relatives headache for the corporate because it shores up its save of living in the country.

The Silicon Valley firm has invested $5.5 billion in India and, since 2017, has struck larger than 400 deals, a ways surpassing U.S.-basically basically basically based opponents take care of Accel and Lightspeed, records from Accomplishing Intelligence reveals.

“As an entrepreneur you elevate money from Sequoia on account of their recognition to work with founders closely,” said one CEO of a Sequoia-funded startup, who declined to be named to manual clear of negative relationships.

He become amongst a dozen startups with funding and board representation from Sequoia who said the corporate had no longer kept them in the loop about governance-linked issues that made headlines in India – and who afraid that the incidents would possibly replicate upon them as effectively. They declined to be identified.

Sequoia did no longer acknowledge to Reuters queries for this text.

The first predominant imprint of governance complications this year at Sequoia-funded startups emerged in January, when digital payments provider BharatPe launched a probe that ultimately led to the sacking of several staff and findings of vendor malpractice. read extra

Three months later, Singapore-basically basically basically based trend startup Zilingo said it had suspended its 30-year-extinct CEO and cofounder Ankiti Bose, a worn Sequoia analyst, over suspected financial irregularities. She become later pushed aside in what Bose has said become a wrongful termination. read extra

The folk accustomed to the April London assembly said Sequoia’s traders did no longer point out explicit plan back or waning strengthen for its work in India on account of the incidents, however it silent faced extra fallout later.

In Can also fair, Sequoia wrote to some of its traders that it become delaying $2.8 billion in contemporary India and Southeast Asia funds over ongoing governance concerns at an Indian portfolio company, per two sources and an electronic mail seen by Reuters.

The company did no longer instruct at that point, even though it launched this week that the fund had efficiently closed. read extra

And this month, Sandeep Kapoor, Sequoia’s in-apartment total counsel in India for nearly 9 years till 2019, integrated the corporate in a defamation lawsuit in opposition to media firms that reported on a leaked Sequoia electronic mail of June 2.

Kapoor’s firm, Algo Well suited, said in a press observation that the electronic mail, sent to Sequoia’s portfolio firms, had made baseless references to “pertaining to cramped print” about the firm and become harming its pursuits.

The law firm said in its court docket filing that Sequoia become its top consumer in billings, however the U.S. mission capital firm had terminated its engagement with it in January.

Kapoor declined to instruct while the topic become before a deem. Sequoia in the predominant court docket listening to of the case closing week sought time to acknowledge the allegations. The case is subsequent plot to be heard on June 18.

India’s startup sector had a blockbuster year in 2021 with $35 billion in fund raising, per Accomplishing Intelligence, however the enhance has since subsided and governance complications are basically cropping up at a substitute of startups. read extra

“It is miserable for Sequoia … however the topic become systemic,” said Anirudh Damani, managing partner at India’s Artha Accomplishing Fund.

In step with the sources accustomed to Sequoia’s pondering, the corporate believes it become cautious with due diligence at some level of the startup enhance however it’s now extra bolstering its efforts on startups’ governance training, whistleblower insurance policies, audits and controls, as effectively as communications with portfolio firms.

As allotment of stricter checks, Sequoia desires to make certain that its effectively-funded investee firms win a “very sturdy CFO” and that startups total financial audits in time, said certainly some of the sources.

Another supply accustomed to the topic said Sequoia representatives had affirmed its dedication to investing in India and to company governance in a assembly earlier this month with India Finance Minister Nirmala Sitharaman.

The minister’s save of living of industrial tweeted a photograph of the assembly’s participants at the time, however did no longer acknowledge to a query for instruct.

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Reporting by M. Sriram in Mumbai and Aditya Kalra in Unique Delhi; Improving by Mike Collett-White and Edmund Klamann

Our Standards: The Thomson Reuters Belief Tips.

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