Sequoia Capital South East Asia: Early Stage Investment and Why it is Different from Silicon Valley?

The best accelerator programmes are known for their ability to help companies grow. Consequently, the go-to metric to assess the effectiveness of an accelerator is follow-on funding.

A look at the classic model of Y Combinator in the US—perhaps the most famous accelerator; it graduated 197 companies in its most recent batch this past summer—shows a simple thesis: get great companies in, give them top mentoring, and present them to investors who can write a cheque to fuel their growth.

That final component

funding is critical since it is the fuel for these startup rockets to hit warp speed and attempt to fulfil their potential.

Surge, though, has taken a different approach. The programme grants every one of its participants a $1.5 million cheque. That can be taken as is, or it can be used as part of a larger funding round if there is interest from investors and the startup, too, is keen. The Surge programme also retains the option to invest a further $1 million in a subsequent round to retain its stake pro rata.

Surge writes these cheques precisely to avoid the manic rush of a typical accelerator programme. These ordinarily end with the madness of a demo day—the hectic curtain-closer which sees startups deliver on-stage pitches to woo circling investors. Surge finished with a ‘demo week,’ but Sequoia had played matchmaker between companies and VCs in the weeks leading up to it. That slower pace was designed to encourage more qualitative conversations.

That makes sense for Sequoia, as We noted after the announcement of Surge earlier this year. From a clinical perspective, Surge is a bet that at least one member of each cohort will make it big. In the event that happens, the firm has already secured a lucrative stake through Surge, with the option to enlarge its presence through an investment via the Sequoia India and Southeast Asia fund—although that is not guaranteed for just any Surge graduate.

A different kind of accelerator

While Surge ensure money isn’t an immediate concern, none of the 17 inaugural members of Surge have raised funding since the programme finished in June. The first deals, however, are on the horizon and are telling of Sequoia’s ambition—not just for the size of the deals, but for the global growth investors Sequoia has brought to the table. Something especially significant given the relative infancy of these startups.A different kind of accelerator

Take Bengaluru-based KhataBook, which sells accounting software to SMEs. The startup—co-founded by ex-Housing COO Ravish Naresh—is close to raising upwards of $17million. Its backers are set to include global names like Ribbit Capital, DST Partners—a fund affiliate to Yuri Milner’s DST Global fund—and other US-based investors, a person with knowledge of the discussions said, echoing previous media reports. Sequoia itself is set to participate, and the round will give KhataBook a pre-money valuation of $50 million.

The company, which previously took part in Y Combinator, could be set for an even greater windfall. Entrackr reports that it may receive an additional round of at least $75 million led by Chinese internet giant Tencent.