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 firm and earmarking more than $500 million for investments in the world’s most populous nation.

The U.S. venture capital group is merging with Venture Highway, an India-based firm whose investments include social commerce startup Meesho and B2B industrial marketplace Moglix. TechCrunch reported about the two venture firms’ talks for a deal in January.

The deal will see the combined entity plot a new multi-stage investment strategy for General Catalyst in India, spanning early to growth-stage checks across industries, Venture Highway founder Neeraj Arora and its GP Priya Mohan told TechCrunch 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 include 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 be needle-moving for the economy,” said Mohan.

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

The new allocation positions 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 isn’t acquiring Venture Highway’s past startup portfolio holdings, but will consider them “very much part of the GC portfolio going forward,” said General Catalyst CEO Taneja in an interview with TechCrunch.

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

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

India, which saw a GDP growth of 8.2% in the fiscal year ending March, has cemented itself as the world’s fastest-growing major economy over the past decade. Favourable policy changes have spurred growth across industries, attracting some of the world’s largest investors.

SoftBank, Tiger Global, Peak XV, Lightspeed, Accel and others have deployed about $100 billion in Indian tech startups in the past five years alone, and are beginning to see some returns as many Indian firms go public. But “returns on capital in India have sucked historically,” Tiger Global’s Scott Shleifer said at a virtual gathering with Indian entrepreneurs last year.

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

Taneja anticipates more partnerships with Indian conglomerates going forward. “I believe that many of the conglomerates in India are very entrepreneurial and will play a significant role in the growth opportunity of India,” he said. “Some of the opportunities we want to invest in or help build in India, it might make sense to radically collaborate with them.”

He added: “We have this deep belief that when you’re transforming industries, no matter where you are in the world, you have to team up with the industry leaders. We do that in healthcare here [in the U.S.] with a lot of healthcare systems, we are actively working with various governments when it comes to policy and issues and things like AI.”

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