Lightspeed raises $500 million to invest in startups across India, Southeast Asia

Lightspeed Venture Partners has raised its largest fund dedicated to India and Southeast Asia at $500 million. With the closing, the Silicon Valley-headquartered venture capital firm has joined a growing set of technology investors that have amassed large amounts of dry powder even as a funding slowdown hits the technology sector worldwide.

Lightspeed, which has backed startups such as Oyo, Udaan, Sharechat and Byju’s, has increased the size of its fourth India fund substantially from its previous corpus of $275 million, which it racked up in 2020.

The India fund is a part of the $7 billion that Lightspeed announced it had raised overall to deploy in early- and growth-stage companies globally.

Bejul Somaia, a partner at Lightspeed who set up the fund’s India franchise in 2007, has been promoted to its global leadership team and will spend time between the US, Europe and India. Somaia will serve on various investment committees in addition to his existing role of overseeing India. Lightspeed presently has nine partners in its India team.

“The opportunity continues to broaden in scope… founder quality continues to improve, technology adoption is accelerating, and we’ve begun to see venture-backed companies get public. All these developments give us confidence in the India and Southeast Asia opportunity,” Somaia told ET in an exclusive interview.

A growing number of early-stage investors have been shoring up far bigger funds over the past year or so as digital businesses gained immensely on the back of the Covid-19 pandemic.

Sequoia Capital India closed its largest India and Southeast Asia fund at $2.85 billion, Elevation Capital (formerly Saif Partners) raised a $670 million India fund, while Accel picked up $650 million for India and Southeast Asia. Even smaller firms such as Stellaris Venture Capital have doubled and tripled their corpus to leverage the technology bull run.

The fund will cut cheques of $500,000 to $15 million and focus on seed to Series B investments, with growth capital coming from its global vehicles.
Even as India-dedicated VC firms mop up larger sums from limited partners, or sponsors in the fund, they have enlarged the scope and geography of their investments.

ET reported on February 15 that Lightspeed’s strategy is to focus on growth-stage deals with a dedicated team in place to scout opportunities in India.

Growth-stage investments usually come after a startup’s first few rounds of funding, which VC funds typically don’t participate in. But over the past few years, globally and in India, early-stage investors have raised larger funds along with specific growth-stage vehicles to protect their shareholding in buzzy startups.

Somaia said the VC firm’s push towards growth investing won't change amid a squeeze in late-stage funding.

“When we commit resources to a market, it's really done with a very long-term view... What's clear is that this region matters to us, and it will take some time for the growth markets to adjust and find a new equilibrium. That's okay, it doesn't change our view of the market,” he said.


Early-stage funding has, however, been less impacted so far, as more funds including Tiger Global and Alpha Wave Global (formerly Falcon Edge) try to get into seed and Series A financing.

“We're not yet seeing any significant changes in early-stage valuations... What we have begun to see is a slight reduction in the pace of activity and a flight to quality... What that means is that if there's an early-stage opportunity with a really strong team, they will likely be able to raise at around the same levels that they might have raised six months ago,” Somaia said.

On the correction in the valuation of technology firms, both in the public and private markets, Somaia said, “These periods, as difficult as they are, are necessary. While one can’t predict how long it will last, we expect it to be longer than previous cycles because there are a whole bunch of factors in the mix.”

“At the beginning of the year, we started engaging with founders, sharing what we were seeing and encouraging them to adjust to what's coming... Companies have to cut burn, they've got to make their capital go further, they've got to clearly show that the underlying economics work,” he added.

After a slew of startups hit the public markets last year, new-age tech firms have postponed their Initial Public Offering (IPO) timelines. Since its entry into the India market, Lightspeed has invested over $1.5 billion in the country while clocking returns from companies such as IEX (IPO), Oyo and Tutorvista, among others.

Secondaries and mergers and acquisitions continue to be a healthy exit option for the Indian market, Somaia said. “Lightspeed has generated significant liquidity from India across secondaries, public markets and trade sales. An IPO is just one path to liquidity. Secondaries were a pretty meaningful route to liquidity even prior to last year. And we do think that India is an important digital market that will lend itself to more M&A, both in terms of M&A with domestic companies that have scaled as well as global companies,” he said. Lightspeed had taken home around $1 billion in cash from the sale of half of its 13.4% stake in hospitality startup Oyo in 2019 when its founder Ritesh Agarwal executed a $1.5 billion share buyback, ET had reported . The VC firm has also partially sold some stake in edtech major Byju’s, according to people familiar with the matter.

An active backer of web3 startups globally, Lightspeed has also said it would launch Lightspeed Faction, a new and independent crypto-native team in the blockchain ecosystem.