Lightspeed raises $500 million for its new India and Southeast Asia fund

Lightspeed has raised $500 million for its newest India and Southeast Asia fund, its largest for the regions, as it looks to make deeper investments in the South Asian market that is increasingly attracting global investors.

The fund, fourth for Lightspeed India, was hard-capped at $500 million, meaning the firm didn’t want to raise additional capital, said the firm, which unveiled its $275 million third India fund in 2020.

The Tuesday announcement confirms ProWellTech’s April report, which said Lightspeed had initiated fundraising deliberations for the new India and Southeast Asia fund and was aiming to raise about $500 million.

Lightspeed additionally said Tuesday that it has raised over $7 billion across several funds, including India and Southeast’s.

Lightspeed began investing in India over 10 years ago and has amassed an impressive portfolio of several fast-growing startups including Byju’s, India’s most valuable startup, SaaS firm Innovaccer, e-commerce giant Udaan, social media giant ShareChat and payments giant Razorpay.

It began investing in the Southeast Asian market in the past decade and has backed several startups including Ula, which has since been backed by Jeff Bezos, and ride-hailing giant Grab.

The firm, which has a team of nine partners in India and Southeast Asia, is nearly doubling the size of its fund because it’s seeing more opportunities in the regions as a young crop of startups attempt to solve deeper and newer problems, said Rahul Taneja, a partner at Lightspeed, in an interview with ProWellTech.

“If you dial back 15 years when India internet 1.0 started, we saw the emergence of business-to-commerce marketplaces of digital goods such as MakeMyTrip and BookMyShow. Now the Indian internet economy is much broader with so many new sectors and within those sectors, there is a ton of depth,” he said.

“Another interesting factor that we increasingly see now is the quality of entrepreneurs who are choosing to launch their ventures. Our belief is that today we have the opportunity to play much wider,” he added.

Like most funds, Lightspeed hit the brakes during the initial months after the pandemic broke. What makes Lightspeed’s strategy interesting is that it largely refused to participate in the record frenzy funding cycle of last year.

“Lightspeed has been highly selective about the startups we back,” said Hemant Mohapatra, a partner at Lightspeed, in an interview with ProWellTech. “We never want to be on the lists of funds that do the most number of deals.”

“Last year, we were seeing very high-momentum weekend deals with very, very high valuations. I will say for the most part, those deals did not meet our bar and we ended up passing on those companies. Our deployment pace compared to the market during the last year and a half was slower,” he said.

Lightspeed has remained consistent with its approach and speed of deal activities and is still investing at the same pace as last year — which compared to the market conditions now — is faster, said Mohapatra, who previously worked at AMD, Google and Andreessen Horowitz.

“It’s an area of deliberate choice for us. Repeatedly over the last few years, we have had discussions about whether we should make any changes to our strategy around the pace of investments and the kind of companies we are supporting,” said Taneja. “I think we have been fairly level-headed and in hindsight that looks great.”

“If we are excited about 10 companies, we will invest in all ten of those. If we are not excited about any of them, we will not make any investment,” he added.

Lightspeed will continue to focus on areas such as consumer internet, SaaS, fintech and edtech, the two partners said, adding that the firm is also increasingly evaluating newer opportunities in additional sectors such as climate-tech, cross-border payments and web3. Lightspeed India has invested in nine web3 startups in the last one year.

It’s also stage-agnostic about investment opportunities. Taneja said Lightspeed India works closely with other arms of the firm and whenever needed, the global fund delivers the big checks as we have seen in the cases of Udaan and Razorpay.

The world’s second most populous nation has attracted scores of high-profile investors in the past 12 years. Sequoia and Accel, both of which have also been investing in the South Asian market for over 10 years, announced new funds recently.

SoftBank, Alpha Wave Global and Tiger Global have also increased the pace of their investments in India in recent years. SoftBank invested over $3 billion in India last year alone. Tiger Global has invested $6.5 billion in the country to date, ProWellTech reported Monday.