VC firm Peak XV has pruned the size of its largest fund by 16per cent as growth-stage funding to the start-up ecosystem slowed down significantly over the past two years.

The firm had raised $2.85 billion for its eighth fund in May 2022, and will return about $465 million to its Limited Partners (LPs).

“In the context of a richly priced public market in India, we are investing in a measured manner in our growth fund, while we continue to lean in on seed and venture stage opportunities. As a result, we have made the decision to re-size our 2022 vintage funds by 16per cent,” Peak XV said in a statement.

Peak XV Partners has opted to tie a portion of its carried interest to profit distributions in its growth and multi-stage funds while keeping the economics of its seed and venture funds unchanged.

The downsising reflects the challenges in capital deployment over the past 24 months, especially for growth and late-stage ventures.

Ventures

The decision has been positively received, as highlighted in feedback from a large non-profit LP, it added.

“Our conviction about investing in India & South East Asia has never been stronger. We are on track to have our second best year for distributions and exits in our history thanks to strong portfolio performance,” the VC firm also said.

Peak XV will also cut the management fee it charges to its investors or LPs to 2per cent from 2.5per cent for the fund, according to sources.

This comes at a time when the VC is also exiting Zomato and Mamaearth and offloading stakes in start-ups such as K12 Techno, Pocket Aces and PingSafe via secondary transactions and mergers and acquisitions (M&As).

Peak XV Partners, which spun off from US-based VC Sequoia Capital in June last year, has been one of the most active start-up investors in India and has backed nearly 700 companies.

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