Folks at Sequoia like to tell a legend about VT Bharadwaj. How, back in the day, before Bharadwaj joined Sequoia, he was the youngest, best performer at McKinsey & Company. An electronics engineer, straight out of BITS Pilani, Bharadwaj had a fancy seven-digit salary at the firm, and a great career before him. And then one day, he picked up his bag and left. Just because he wasn’t enjoying it anymore. This legend is important in the context of what happened to the partnership at Sequoia, one that eventually resulted in Bharadwaj’s exit.
How are the shares bifurcated?
No partnership is equal. Not in terms of partner shares. Not in terms of voice. There’s always one, someone who commands better. In 2014, when Sequoia headquarters decided that technology investments would be the focus of the firm’s investments in India, it queered the pitch for the company’s non-tech investments. The decision was that tech would get 70, non-tech, 30. Of the total fundraise.
“The bias towards tech meant that Shailendra became the partner with the big voice in the room,” says the second source quoted earlier in the story. “I am not saying it is for the good or the bad. By far, Shailendra is the most prolific partner at the firm. If I count it correct, he has probably led 50 investments since 2011. Individually, and this is my guess, he must have deployed close to $ 1 billion. So it is his voice which commands most of the decision-making in the Investment Committee (IC).”
It will be fair to say that as Singh’s sway on the IC increased, so did Sequoia’s ambition.
Time and again, this subject came up for discussion. There is no way that India can take $1 billion in the capital in the tech business. The ecosystem is just not ready for it, there aren’t enough companies. That’s how Sequoia India started investing in companies in Southeast Asia. And Singh moved to Singapore to find and lead those investments.
This complicates things further.
The year 2017 was one of many disagreements amongst the partners. The question being asked by almost everyone, except the tech investment team, was, where is the focus? Focus is the key to success in the venture capital business and Sequoia seems to be doing the exact opposite.
Factors that decided the distribution
“The fund was separated by geography. By stage of investment. And by sector of investment,” adds the third source quoted above in the story. “It is absolutely crazy. You are investing in India. In multiple countries outside India. In technology. In healthcare. In consumer products. You are doing seed investment. You are doing growth. All of this is happening at the same time. At some point, someone must ask if this is the right thing to do.”
The IC meetings weren’t making things easier. The meetings would be dominated by heated discussions on prospects in Vietnam, Thailand, Indonesia and a few in India. Sure the prospects would meet all the basic checks. Young. First-generation entrepreneur. Large opportunity. But the partners would often be in disagreement on whether the investment would lead to any financial outcome.
“VT was the most vocal of the lot,” says a fourth source who requested not to be named because he didn’t want to get into any trouble with the firm. “He would often ask questions on business metrics. Like, why does putting money in Helpchat make sense? Why does putting money in Unacademy make sense? You can look at it in one way, like there was a healthy discussion or another, that VT started building a reputation that he is anti-tech.”
The source continues: “It is not that VT is anti-tech. It was, and I think it continues to be, his belief that the opportunity to make money from tech is limited in India. After asking too many questions, there is a point when you give up. I am not saying that partnerships need to be a democracy, but when you can’t influence a decision in the IC, then you either live with it or you don’t. So the crying baby gets the milk.”