Peak XV, the Top Venture Firm in India and Southeast Asia, Cuts Fund Sizes and Fees to Align with Investors
In a strategic move to better align with its limited partners, Peak XV, the largest India and Southeast Asia-focused venture firm, has announced significant changes to its funds. The firm, which raised $2.85 billion in funds in mid-2022, is reducing the size of some of its funds by $465 million and lowering fees.
Peak XV is scaling back its growth and multi-stage funds while adjusting its economic structure to a 2% management fee and 20% carried interest, down from 2.5% and 30% respectively. The firm will maintain provisions to catch up on carried interest up to 30% after achieving a 3x distributed to paid-in capital ratio. However, the economics for its seed and venture-focused funds remain unchanged.
This move comes after Peak XV's separation from Sequoia over a year ago, as the firm sought to avoid conflicts amid geopolitical tensions. 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 following a market correction in the tech sector.
Peak XV's decision is driven by concerns about the inflated public market performance in India and a perceived lack of venture-scale opportunities in the near future. Analysts have noted that India's price-to-earnings ratio is significantly higher than other emerging markets and global markets, with more tech IPOs in India than in the US this year.
In conclusion, Peak XV's move to reduce fund sizes and fees is a strategic decision to adapt to market conditions and better serve its investors. This shift is reflective of the current trends in the venture capital industry and highlights the importance of staying agile in a rapidly changing market environment. Investors should pay attention to these developments as they may have significant implications for their portfolios and investment strategies.