Venture capital giant Peak XV Partners has downsized its record $2.85 billion fund by 16%, or $465 million, citing a recalibrated approach to investing in India and Southeast Asia.
The development comes a little more than two years after Peak XV, formerly known as Sequoia Capital India and SouthEast Asia, announced raising its largest fund in its history, with the aim to invest in high-growth companies across the region.
“...We have made voluntary changes that we believe will serve us well in a multi-decade time horizon. Our conviction about investing in India and Southeast Asia has never been stronger," Peak XV said in a statement.
The reduction comes as the firm adopts a more cautious approach to its growth fund. Despite the cut in the fund size, Peak XV noted that it was on track for its second-best year in terms of distributions and exits on the back of a strong performance from its portfolio.
Alongside the fund reduction, Peak XV has adjusted its compensation structure for fund managers of its growth and multi-stage funds. The firm will now operate under a 2/20 model, where fund managers receive 2% in management fees and 20% in performance fees (or carry), with a provision to “catch up” on carry to 30%, TechCrunch reported on Wednesday, citing a letter Peak XV sent to its LPs.
The earlier structure of 2.5/30 placed it above industry standards. It will maintain its existing payout model for its seed and venture funds.
“We have decided to make some part of our carried interest linked to distribution of profits in our growth and multi-stage funds while leaving our seed and venture fund economics unchanged,” said Peak XV.
Despite the cut in fund size, Peak XV’s portfolio continues to deliver strong results. The firm has backed over 400 companies, including more than 50 unicorns, and has facilitated more IPOs than any other India-focused venture capital firm since 2020. Notable portfolio companies that floated IPOs include Zomato, Indigo Paints, Truecaller, Five-Star Business Finance, and Mamaearth.
Peak XV also pointed out that while the fund resizing may seem contrarian to the current market exuberance, this measured approach ensures sustainability and continued success for both its founders and investors.
Peak XV said that these changes have been well received by its limited partners. It cited a large non-profit LP as saying: “They’ve always done what is right—finding great entrepreneurs, helping them build thriving companies, and generating strong returns for investors.” It didn’t disclose the name of the LP.
