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Peak XV Partners, previously part of Sequoia Capital, has scaled back its $2.85 billion India and Southeast Asia fund by $465 million, with a 16% reduction. The company has shown a cautious approach to growth investments in a market where private valuations are feeling the impact of a strong public market.
The decision, shared with limited partners via a recent investor letter, allows Peak XV to realign with its backers by releasing them from $465 million in commitments tied to its 2022 funds. By reducing fund size and fees, the firm aims to deploy capital more selectively and stay closely aligned with its investors’ long-term interests.
Peak XV Partners has also adjusted its fee and carry structure, transitioning to a standard 2:20 model, down from the prior 2.5:30 arrangement. This means the firm will now collect a 2% management fee and a 20% share of profits, closer to typical industry standards. However, a catch-up provision remains, allowing Peak XV to increase its carry to 30% once a predetermined return threshold is met, ensuring potential upside after returning profits to investors.
The reduction primarily impacts Peak XV’s growth fund, where it plans to deploy capital more selectively amid an overheated market with limited high-quality opportunities.
This decision reduces Peak XV’s growth fund capital to around $1.7 billion, with an additional $630 million available for early-stage investments. Since the fund’s inception in 2022, the firm has deployed about a third of its growth capital, indicating a strategic shift toward caution as valuations remain high.
Peak XV has reportedly capitalized on market liquidity, making over $1 billion in exits through block trades of companies like Zomato, Mamaearth, and Indigo Paints. By scaling back fund size and fees, the firm aims to provide a more substantial capital base for deals in a competitive investment landscape, enabling greater flexibility for its limited partners.
Peak XV’s shift mirrors a broader trend within the venture capital sector, where several firms are downsizing their fund targets due to corrections after years of rapid growth. Despite the reduction, Peak XV remains committed to the region’s potential and intends to keep investing in seed and venture-stage startups while navigating a more selective approach to growth-stage opportunities.
The restructuring of Peak XV follows its transition from Sequoia Capital, which split into three separate entities focused on different markets. Peak XV, previously known as Sequoia India and Southeast Asia, has raised $9.2 billion across 13 funds but now aims to expedite the deployment and return of its investments.
By year-end, it anticipates surpassing its previous exit performance, which is crucial for shedding its former identity. While this marks the first fund downsizing for Peak XV, its parent company had previously reduced the size of major funds amid a downturn in the startup landscape.