Groww payout, carry row: Inside the avalanche that triggered partner exits at Peak XV

Peak XV Partners had as many as 15 Partners and Managing Directors until a few months ago. However, a total of eight Partners/MDs have quit the firm in recent months, including three top-level departures earlier this week.

Meetings wrapped. Funding commitments nearly secured. Final documents awaiting signatures.

Peak XV Partners, one of India’s most active startup investors, had ticked almost every box for its new $1.2-1.4 billion venture fund when it ran into an avalanche.

Three managing directors -- Ashish Agrawal, Ishaan Mittal, and Tejeshwi Sharma -- together decided to exit the firm to launch their own fund. Their departure, coming midway through a fresh fundraising cycle, sent shockwaves through the venture capital and startup ecosystem, a development first reported by Moneycontrol on February 3.

We spoke to at least eight executives across India’s venture capital and startup ecosystem to piece together the factors that led to the exit of Peak XV’s star performers. While Ashish Agrawal delivered one of the firm’s biggest outcomes through its bet on Groww, a Rs 230 crore investment that multiplied 75X into a Rs 17,300 crore outcome for Peak XV in the past year, Ishaan Mittal was an early backer of another fintech success story, Razorpay, a Rs 63,000 crore fintech major now heading for an IPO.

Based on these conversations, three developments appear to have converged. Matters came to a head just over the past three to four days, triggered by differences over payouts linked to the Groww outcome and disagreements on how profits and carried interest in the new venture fund should be structured.

Carried interest, or carry, is the money venture capitalists earn on profits made on investment – often in many millions

“All partners were aligned until about a week ago. But tensions began building over the last five to six days, which led to Ashish deciding to quit abruptly, with the other two following suit,” said one person familiar with the matter.

Another person briefed on the developments said that while Groww was undeniably a strong outcome, returns at a venture firm could not be attributed to a single individual.

“There are multiple contributors: who sources the deal, who signs the cheque, who decides on follow-on investments, and who supports the portfolio company across functions like talent, finance and operations. The institution is larger than any one individual,” the person said, adding that the disagreements were economic in nature.

Those “economic disagreements" sources said, were twofold: incentives and payouts linked to the outsized Groww outcome delivered by Agrawal, and his share of carried interest in the new fund.

“The demand for a higher share of carry in the new fund came at a stage when most discussions with limited partners were nearly concluded and documents were close to being signed,” a third person said.

According to sources, these friction points were primarily between Agrawal and Peak XV’s senior partners. “Ishaan and TJ are part of the growth funds and were not involved in the new venture fund. But the three have been close friends for nearly 15 years, and Ashish’s exit became the trigger for them to leave together and strike out on their own,” a fourth person said.

Peak XV Partners did not respond to queries sent by Moneycontrol. Agrawal declined to comment beyond what he shared on social media regarding his departure and future.

Peak XV Partners’ managing director Shailendra Singh, however, said in media interviews that the exits stemmed from “economic disagreements” with Agrawal, without offering further details.

The churn at Peak XV

Peak XV Partners had as many as 15 Partners and Managing Directors until a few months ago. However, a total of eight Partners/MDs have quit the firm in recent months, including three top-level departures earlier this week.

These exits are in addition to the churn in the mid-management layer of the investing team and other departures in non-investing teams, including head of marketing, policy functions and more.

Partner exits at VC funds are not new and uncommon, but when several of its top-performing partners exit in quick succession, fund sponsors – or limited partners (LPs) – ask tougher  questions around future bets and on the potential to earn outsized returns from them.

Groww was one of the biggest wins for an investor from the VC circle and Peak was an early backer, having invested in the company around 6-7 years ago.

Peak XV will make a total of around Rs 17,300 crore (around $2 billion) on an investment of just Rs 230 crore (about $26 million as per the USD/INR exchange rate six years ago), a 75X return in record time, as per current stock prices. The value of the outcome will change depending on the stock price direction. Of the total stake, Peak has already pocketed gains of around Rs 1,500 crore (around $180 million), by selling shares as part of the offer for sale (OFS) component during Groww’s IPO in November, an 8X returns, and it still continues to hold a significant share in the company, as per a-back-of-the envelope calculation.

The three – Agrawal, Mittal and Sharma – are set to start their own fund. Options like an equal partnership vehicle, including an arrangement where all three are based in Bengaluru are currently being discussed, according to people aware of the developments. The finer contours, including how much money they will raise are still being worked out.

Will the recent top-level exits at Peak XV Partners hinder its ongoing fundraise? 

While the fundraising process is in the advanced stages, sources say this will lead to fresh questions on the depth of investing partners and stability in the fund. “The LPs had digested the previous exits, but losing three partners again will not go down well,” a fifth person said.

Over the past two years or so, top executives like Piyush Gupta, Abheek Anand, Anandamoy Roychowdhary, Shailesh Lakhani, Harshjit Sethi have all left Peak XV Partners. Of those, while Gupta has already launched his fund, Lakhani and Sethi are in the process of launching a deep tech fund and raising money for the same.

Deja vu

The current disruptions at Peak are reminiscent of what transpired when it was Sequoia Capital India, before breaking away in 2023.

Around 2011, top executives such as Sumir Chadha, KP Balaraj, SK Jain, Sandeep Singhal all left to start WestBridge Capital. Then again, in 2018, Abhay Pandey, Gautam Mago, VT Bharadwaj left the VC fund to start A91 Partners. Both Westbridge Capital and A91 Partners are among the most prolific and well regarded investors in the country today.

Peak XV’s growth funds today are helmed by Shailendra J Singh, GV Ravishankar and Mohit Bhatnagar. While Singh has been based in Singapore and is increasingly spending time in the US to focus on AI bets, Ravishankar relocated to Dubai a few years ago and is in the process of moving back to Bengaluru. Bhatnagar is based in New Delhi. Rajan Anandan takes care of its very early stage program Surge.

While Peak XV internally promoted Abhishek Mohan to Managing Director and General Partner from Principal in the venture team and Saipriya Sarangan has been elevated to chief operating officer from chief people officer as part of its announcement yesterday, it remains to be seen how Singh and GV restore stability and boost investor confidence in the coming months.

Peak XV, by a back of the envelope calculation accounts for around fifth of the total money invested into the Indian startup ecosystem. Since being set up around 17 years back, it has invested in over 400 companies, from across 16 funds, of which over 50 are unicorns and more than 23 have gone public. It now manages over $9 billion in assets. Its stability will have an important bearing for the Indian startup ecosystem.