Recession Run: Sequoia’s $850m plan during a downturn

The funding winter is here. News of layoffs and troubles in startups have been cropping up. In this Q&A series, we talk to Southeast Asia’s investors to suss out what opportunities they see, what strategies they’re implementing, and what areas of investment they’re looking at in the next few months.

Last month, Sequoia Capital launched a dedicated fund worth US$850 million for Southeast Asia, its first after operating in the region for over 10 years.

This announcement comes at the right time as valuations of startups have been on the decline and are ripe for the picking for investors. The startup world is beginning to feel the effects of a recession and many in the growth and late stages have already been hit hard. The cascading impact of this market correction is also expected to be seen in firms that are in their seed to series A stages.

That said, Abheek Anand, managing director of Sequoia Capital Southeast Asia, believes that this downturn is a “necessary and healthy correction in the markets.” He says that the current market conditions will accelerate the path for businesses to demonstrate viability and increase capital efficiency, and it will also result in better design choices by founders who are building for the long term.

Sequoia Capital Southeast Asia managing director Abheek Anand / Photo credit: Sequoia Capital

He adds that Sequoia will stay the course on its investment plan bet on sectors such as consumer internet, fintech, and B2B SaaS, as well as emerging industries like deeptech, healthtech, and Web3.

Here are more insights from Anand on Sequoia Capital Southeast Asia’s plans during the recession period and some of his advice for founders facing challenges in the current market downturn:

What particular startup sectors are you looking to invest in with the SEA Fund I?

Anand: While Sequoia launched a dedicated US$850 million fund for Southeast Asia for the first time, the firm’s focus and strategy for the region has not changed. Following a decade-long presence in Southeast Asia, the new funds bolster our mission to help founders build enduring companies from idea to IPO and beyond.

What this fund signals is the growing conviction among the team and limited partners on the long-term opportunities in Southeast Asia, where large companies are being created in a rapidly expanding market. We continue to believe in the potential of tech-enabled sectors such as consumer internet, fintech, and B2B SaaS, as well as emerging ones like deeptech, healthtech, and Web3.

Photo credit: Sequoia

How much of the SEA Fund I will the company be looking to put into early-stage investments, and how much will be dedicated to growth-stage investments?

Sequoia Capital Southeast Asia will have a strong focus on partnering with founders and startups from the very early stages – often as their first capital partner. A significant portion of the new funds will be deployed toward seed and series A rounds. Reinforcing our support for seed-stage companies and women founders, we will also double down on programs like Surge and Spark, which go beyond capital and contribute to strengthening the startup ecosystem in the region.