In March this year, Silicon Valley’s Sequoia Capital drafted a grim note to its portfolio companies about what it called the Black Swan of 2020. Turbulence is coming, Sequoia wrote. Question all assumptions, brace for the worst, and factor all possible scenarios.
It’s been more than six months since. The COVID-19 virus has anything but been firmly vanquished, but Sequoia believes there is a glimmer of hope yet for 2021. The possibility of a breakthrough vaccine is one, shared Abheek Anand, managing director at Sequoia Capital. But even more than that, Southeast Asia and India’s markets are already exhibiting a tremendous capacity to adapt to this “COVID new normal”.
“The part that I think was a very interesting, positive surprise for us was just how quickly the capital markets and the digital world adapted to this new normal,” shared Anand during a fireside chat at DealStreetAsia’s Asia PE-VC Summit 2020.
Well capitalised investors are already flocking to digital-first sectors which are quickly discovering the need to digitise en masse with great urgency. “There is a lot of liquidity in our markets,” shared Anand. “We’ve also been positively surprised by how much investor interest there is for the highest quality companies.”
It is also influencing deal flow into Sequoia Surge, a 15-week seed-stage programme aimed at “supercharging” startups in Southeast Asia and India into their next level of growth. According to Rajan Anandan, managing director at Surge and Sequoia Capital India, founders are already thinking much “bigger” these days. Founders don’t want to just build regional businesses. They want to build global ones.
“The reality is that if you’ve got a purely digital business, it doesn’t matter whether it’s a SaaS company, an edtech company, or a payments company. You can actually dive into all 4 billion-plus consumers around the world. This is absolutely happening,” shared Anandan on the live panel.
The ecosystem’s shift away from vanity metrics towards core fundamentals is also a healthy change overall. Valuation growth may look great on paper, but demonstrating the quality of a company’s “economic growth engine” is something that every startup has to do at some point or other in a startup’s life journey, shared Anand.
“The sooner you do it, the better,” said Anand. “It’s also much easier to prove this while you’re small rather than at the growth stages.”
This transcript has been edited for brevity and clarity.
