China is uninvestable, but surprised that Sequoia left India: Chamath

File image of Chamath Palihapitiya, CEO of Social Capital and a Silicon Valley investor

Silicon Valley investor and CEO of Social Capital Chamath Palihapitiya has voiced disbelief at venture capital (VC) firm Sequoia Capital’s decision to exit the India market by hiving off its Asia business into separate units.

On his podcast ‘All-In’ with co-hosts Jason Calacanis, David Sacks, and David Friedberg, Palihapitiya questioned the venture capital firm’s decision to leave one of the world’s fastest-growing economies.

Palihapitiya said that while he could understand Sequoia's decision to exit from China since the country is “largely uninvestable for the next 30-40 years,” he “was surprised about why they would allow India to leave.”

On June 6, Sequoia announced a split which created three units — Sequoia Capital US and Europe under Roelof Botha; the India and Southeast Asia firm, which has been rebranded as Peak XV Partners, under Shailendra Singh; and the China firm, now called HongShan, under Neil Shen.

Peak XV partners did not comment on Palihapitya’s views. However, in an interview with Moneycontrol on June 7, Shailendra Singh, the Managing Director of Peak XV Partners, had rebutted speculation that the firm was retreating from India. He had said then the investment firm “will double down on India and Southeast Asia and other core markets because we have lots of freedom to make unique and specific choices for our market.”

Palihapitiya emphasised that India's economy is growing at 6 percent per year, and it would have been advantageous for Sequoia to keep its Indian counterpart attached to the global brand, as a differentiator from competitors. He also added that the India unit “has no elite” like China has in Shen, the report added.

Palihapitiya further speculated on the podcast that Botha may have deemed the India team as underperforming and decided to cut ties with it, potentially allowing the firm to re-enter the market after a few years with a rejuvenated team. He suggested that the given rationale for the split was an attempt to mask the organisation's recent missteps and financial losses, adding that his decision would have been “to do nothing and let the dust settle”.

Palihapitiya is facing multiple lawsuits in the US, filed by investors in special purpose acquisition companies (SPACs). The investors in these entities that were formed to provide companies a backdoor entry to public markets alleged that mismanagement by SPAC executives such as Chamath caused them losses.

Palihapitiya also disagreed with Sequoia's claim that conflicting portfolios among its investments were a factor in the split, stating that funding competing companies is not uncommon in the US.

“That happens in the United States. Sequoia has always been known to fund everybody that they think will make money no matter how much they compete, no matter where they are. Sequoia as an organisation is elite. They're there to make money for their LPs (limited partners),” he said.

Prior to the split, Sequoia Capital globally managed approximately $56 billion in assets. Peak XV, which will continue deploying its latest $2.85 billion fund, currently manages $9 billion worth of assets in the India and Southeast Asia region. More than 50 companies in its portfolio are valued at $1 billion or more. The firm has seen 19 IPOs and M&A deals, resulting in $4.5 billion in realized exits.

On Monday, June 12, Moneycontrol reported that Peak XV Partners earned a massive return of 16X on its total investments in Go Fashion, the women’s wear company.