Lightspeed India, which has backed startups such as Razorpay, Sarvam and Oyo, expects to realise about $500 million in cash returns by the end of this year, driven by a broadening exit landscape, a top executive at the venture capital firm said.
The figure spans exits through private secondaries, mergers and acquisitions, block deals and initial public offerings over a 3.5-4 year horizon, Anuj Bhargava, managing director and head of corporate and strategic development for India and Southeast Asia, told Mint in an interview.
This comes at a time when limited partners (LPs), who invest in venture capital and private equity funds, are placing greater importance on actual distributions rather than paper returns before committing capital to successive funds.
“While the primary exit routes were through the public markets and block deals, we are increasingly seeing private secondaries and M&As also gain traction,” he said.
Some of its recent exits include a partial sale of its stake in through private secondaries and a block deal in Physics Wallah. A private secondary transaction refers to shareholders selling their stakes to other existing or new investors, where no new capital is injected into the company.
Exit pipeline
Since 2007, Lightspeed India has deployed about $2.5 billion across its early and growth strategies in more than 115 active portfolio companies. It has a steady pipeline of companies looking to tap the public markets over the next few months.
In addition, Bhargava noted that the firm will execute a few private secondaries and M&As, without disclosing specific names. Some of the IPO-bound companies in its portfolio include Oyo, Razorpay, Zetwerk, ShareChat and , many of which have filed their draft papers with Sebi.
Historically, India has not been a big M&A market, for either domestic or cross-border transactions. “While around 70% of early-stage investor exits in the US may come through M&A, that share in India is far lower, although it is now picking up,” he explained, adding that this is now more prominent in sectors such as consumer and fintech.
“In highly fragmented sectors with many loss-making players, consolidation is a natural outcome,” said Bhargava.
Lightspeed has sold its positions in enterprise SaaS companies to large US-listed companies and expects that trend to continue.
For instance, Revv—a document automation and forms template SaaS startup—was acquired by NASDAQ-listed LegalZoom in 2022, while Adobe acquired Bengaluru-based AI video creation startup Rephrase.ai the following year. Earlier this year, Portkey, an AI gateway and infrastructure startup, was acquired by Palo Alto Networks.
The firm’s experience reflects a broader shift in the exit market, where strategic acquisitions are becoming an increasingly relevant route alongside public-market listings and stake sales.
Block deals
Broadly, venture capital and private equity firms are increasingly turning to block deals to monetize their stakes, with Accel, Elevation Capital, Alpha Wave and Temasek among those to have executed such transactions in the past six months.
Such transactions are expected to increase as some early funds continue to hold meaningful stakes in companies even after they go public.
“It is easier for public-market funds to buy these stakes in blocks as they have tracked the companies and their performance for two to three years,” Bhargava said.
The investment ecosystem is seeing a more definite structure around liquidity pathways in India, which has enabled funds like Lightspeed to deliver returns consistently. “Of the different pools of capital that have emerged, private secondaries activity has been a great source of exits for early-stage funds,” he described.
Globally, private secondaries saw strong participation from hedge funds, pension funds, growth, and private equity funds, followed by sovereign wealth funds from countries such as Singapore, which were active in both primary and secondary transactions.
More recently, domestic institutional investors, family offices and high-net-worth investors, alongside dedicated secondary funds, have also become active in private markets, attracted by the potential for better value and larger allocations. “So, different pools of capital have driven activity at different points, and we have regular interactions with all these investors,” he explained.
Continuation option
Bhargava also acknowledged continuation funds as an attractive option for investment firms nearing the end of a fund’s life, allowing them to retain high-performing portfolio companies while providing liquidity to limited partners.
Mint has reported on several private equity firms like Multiples’, ChrysCapital, Kedaara Capital and Siguler Guff that have created continuation funds or are in the process of setting up a vehicle.
“While continuation funds are more common globally, we are beginning to see some instances emerge in India as well. These transactions are typically larger in size, which is why they have been more prevalent in private equity than venture capital,” he said.
“However, as VC portfolios mature and more assets reach scale, we can expect to see greater use of continuation vehicles in the venture capital ecosystem as well,” Bhargava explained, adding it is one of the many tools that the firm has evaluated in India.
Globally, Lightspeed built a $600 million continuation fund called Project Mercury last year to extend its ownership in six companies: OpenAI, PBC, Verkada, Rippling, Reflection AI and Glean Technologies.
Lightspeed is currently in the market to raise its fifth India fund with a target of about $300 million, lower than its previous fund which was about $500 million in size, as per various news reports.
“We have always been calibrated to the opportunity and the returns we are targeting, and our strategy remains unchanged. The deals and opportunities we pursue will evolve, but our global DNA is focused on AI-first opportunities across consumer, enterprise and fintech,” Bhargava said, declining to comment on the current fundraising process.
Regarding valuations, he added they have normalized in some sectors globally, while areas such as AI continue to command valuations based on expectations several years ahead.
“There is still limited correlation between public-market valuations and early-stage companies as there is a long journey in between. New-age have however seen some sensitivity but that is more of a reflection of the current market cycles,” Bhargava concluded.