General Catalyst makes India push with Venture Highway merger

General Catalyst, a Silicon Valley venture capital group, is expanding its presence in India by joining forces with a local venture capital firm and committing more than $500 million to invest in the world's most populous country.

The American venture capital group is merging with Venture Highway, an India-based company that invests in social commerce startup Meesho and industrial B2B marketplace Moglix, among others. JS reported in January about the two venture capital firms' talks about a deal.

The deal will see the combined entity craft a new multi-phase investment strategy for General Catalyst in India, encompassing early to growth stage controls across sectors, Venture Highway founder Neeraj Arora and his GP Priya Mohan told JS in a joint interview.

Venture Highway, which raised $78.6 million for its second fund in 2020, has traditionally focused on early-stage investments. As part of the General Catalyst team, it will also expand its remit to incubating startups, a relatively uncharted territory in the country. “Our vision is to be part of building a number of companies that will not only go public but also boost the economy,” Mohan said.

General Catalyst plans to invest between $500 million and $1 billion in India over the next three years, said Arora, who previously served as chief business officer at WhatsApp and was instrumental in selling the instant messaging app to Meta.

The new allocation places General Catalyst among the largest venture capital firms in India, alongside the likes of Lightspeed, Accel, Elevation and Nexus, which have each raised between $500 million and $700 million in their recent funds. Peak XV Partners (formerly Sequoia India and Southeast Asia) leads the pack with $2 billion to deploy in the country.

General Catalyst is not acquiring Venture Highway's previous startup portfolio holdings, but will consider them “a large part of the GC portfolio” going forward, General Catalyst CEO Taneja said in an interview with JS.

“We want to support them in the same way we support all our companies in India or anywhere in the world,” he said.

The two companies began exploring ways to collaborate several years ago, but felt the timing was right. “We could have raised more capital. That was one of the options on the table. But if we look from first principles, if we think about the opportunities that India offers today, and what our ambitions are, it made sense for us to join hands with General Catalyst,” said Arora.

India, which posted GDP growth of 8.2% in the fiscal year ending March, has proven itself as the world's fastest-growing major economy over the past decade. Favorable policy changes have stimulated growth across sectors, attracting some of the world's largest investors.

SoftBank, Tiger Global, Peak But “returns on capital in India have historically been poor,” Scott Shleifer of Tiger Global said during a virtual meeting with Indian entrepreneurs last year.

India is not new territory for General Catalyst, which has been investing in the country for more than a decade. The portfolio includes fintech unicorn CRED, used car marketplace Spinny and healthtech startup Orange Health. The company recently led a financing round with Indian conglomerate Tata in Alssym Energy, a company developing next-generation non-flammable rechargeable batteries.

Taneja expects more partnerships with Indian conglomerates in the future. “I believe that many of the conglomerates in India are very entrepreneurial and will play an important role in India's growth opportunities,” he said. “For some of the opportunities we want to invest in or help build in India, it may make sense to work radically with them.”

He added: “We deeply believe that when you transform industries, wherever you are in the world, you need to work with the industry leaders. That's what we do here in healthcare [in the U.S.] with many healthcare systems, we actively collaborate with various governments when it comes to policy and issues such as AI.”

Thursday's announcement follows a similar move by General Catalyst in Europe last year, when the company unveiled plans to merge with Berlin-based venture capital firm La Famiglia. Taneja declined to comment on whether his company will try to copy the model in other markets.

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