Peak XV, the largest India and Southeast Asia-focused venture firm, is reducing the size of some of its funds and lowering fees as it seeks to become “deeply aligned” with its limited partners.
The firm, which raised $2.85 billion funds in mid-2022, informed its backers on Tuesday evening that it would cut $465 million from its 2022 vintage funds, according to a letter seen by TechCrunch.
The venture capital group is scaling back its growth and multi-stage funds, while also trimming its economic structure for these vehicles to a baseline of 2% management fee and 20% carried interest, down from 2.5% and 30%respectively.
Peak XV will maintain provisions to catch up on carried interest up to 30% after achieving a 3x distributed to paid-in capital ratio, the letter stated. The economics for its seed and venture-focused funds remain unchanged.
This move comes more than a year after Peak XV’s separation from Sequoia. The storied venture firm said it was splitting from its China and India-Southeast Asia units to avoid conflicts and confusions amid geopolitical tensions between Washington and Beijing.
The decision reflects a broader trend in the venture capital industry, where many firms have either reduced fund sizes or struggled to raise their target amounts in recent years following a correction after a 13-year bull run in the tech sector.
Peak XV’s rationale stems from growing apprehension about the frothy public market performance in India and a perceived dearth of venture-scale opportunities in the immediate future. It wrote in the letter that it remains bullish about the region.
Macquarie analysts recently noted that India’s price-to-earnings ratio stands at about 21 times, compared with 10 times for emerging markets overall, 14.5 times for global markets, 17 times for the US, and 8 times for China. Notably, India has witnessed more tech initial public offerings this year than the US.
Peak XV began its journey in India more than a decade ago. The firm firm has made a realized and unrealized gains of $10 billion to date, it disclosed in the letter. Since the seperation with Sequoia last year, it has made about $1.2 billion in exits, TechCrunch reported last week.
This is a developing story. More to follow.
