India’s VCs are rewriting the playbook, but where’s the patient capital for innovation?

India's venture capital ecosystem is switching gears. As VC firms wrap up their first funding cycles, reality has set in—returns are lagging, and payouts to limited partners (LPs) aren’t particularly impressive. Now, they’re rewriting the playbook to flip the script.

Earlier this week, Peak XV Partners (formerly Sequoia Capital India) made an unexpected move. Known for its active role in India's private market and constant promotion of the startup ecosystem, the firm informed its LPs that it would return approximately 16% of its largest $2.85 billion fund dedicated to India and Southeast Asia. The firm indicated that it would pursue future growth-stage investments more cautiously.

Peak XV has also slashed its management fees and trimmed the carried interest—the share of a fund’s profits paid to its general partners—from 30% to 20%. This marks a significant departure for Peak XV, which once commanded a premium due to its association with Sequoia Capital, the global VC powerhouse. However, after parting ways with the Silicon Valley giant last year, Peak XV appears to be recalibrating and bringing its fees in line with other VCs in the country.