(Bloomberg) -- Peak XV Partners, formerly part of Sequoia Capital, is reducing its latest growth fund by $465 million and cutting fees on other funds as soaring valuations make it harder to complete deals, especially in India.
Peak XV lowered management fees to 2% on three of its growth and four multi-stage funds, the firm said in a letter to investors seen by Bloomberg News. The venture capital firm also lowered carried interest, or share of profits, to 20% for these funds, according to the letter. Peak XV cut its growth fund, first raised in 2022, by 16% to $2.39 billion.
“We believe that structurally reducing our cost of capital in the growth business will serve us well in the long term and enhance our ability to partner with the best companies,” the firm said in the letter.
Singapore and India-based Peak XV didn’t respond to an email seeking comment.
The move to reduce the fund and lower fees in prior funds is rare in Asia, and underscores the challenges of investing in India where valuations have expanded significantly given the robust market for initial public offerings.
While managers like Peak XV have gained from the hot public markets by exiting their positions through block deals or IPOs, they have struggled to find companies with reasonable valuations for their growth funds, according to people familiar with the matter, who declined to be identified citing confidential information.
Sequoia Capital split into three independent entities, including one focused on the US and one on China. Sequoia India & Southeast Asia, which has raised $9.2 billion across 13 funds, became Peak XV, the original name of Mount Everest.
The firm has made no changes to its seed and venture funds. All Peak XV funds, like those of Sequoia Capital, charged 2.5% in management fees and 30% in carried interest before this change, the people said.
“Mid-cap P/E multiples have expanded significantly in the last year,” the firm said. “This has resulted in high valuations in late stage growth and pre-IPO companies.”
Deal Volume
Deal volume in venture capital declined by 60% in India last year, as investors focused on profitability and product market fit, according to a Bain & Co. report.
Peak XV’s share of profits will rise to 30% if the fund returns three times distributions to paid-in capital, a measure of money returned to investors relative to the amount they put in, according to the letter.
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