Exclusive: How Sequoia Capital hit a jackpot with Pine Labs

Point-of-sale (PoS) device firm Pine Labs is perhaps one of the best bets made by Sequoia Capital in the Indian startup space. The VC firm which invested in Pine Labs for the first time in 2009, has managed to cash in nearly $181 million via multiple secondary transactions over the last several years.

Sequoia Capital is currently the biggest shareholder in Pine Labs, owning around 42.53% stake in the unicorn. As per regulatory filings accessed and analysed by Entrackr, Sequoia’s stake is worth an estimated $640 million. 

This comes almost four months after Pine Labs raised $300 million in a Series H round led by payments major Mastercard, which saw Sequoia take in money through the secondary sale. Lenarco limited has also picked up preference shares and invested $ 15 million in the round — a detail that wasn’t mentioned during the announcement. 

According to Fintrackr, Pine Labs is being valued north of $1.5 billion in the ongoing Series H round. Mastercard Asia Pacific infused $70 million via primary stake acquisition while the rest $30 million came via secondary transactions where Sequoia and 33 individual shareholders diluted their stake. 

Sequoia took home around $26.8 million in this transaction. And this was not the first partial exit for the American VC.

Prior to the recent secondary transaction, Sequoia had transferred a part of its stock to Madison India for $34.5 million in 2016 followed by stake sale to Temasek during June 2018 for nearly $71.67 million in the Temasek-Paypal $125 million Series F round in Pine Labs. In the same round, Sequoia also offloaded shares to Paypal for an estimated $47.8 million.

Sequoia's last investment tranche in Pine Labs was made through ‘Sequoia Pine Investments Holdings.’ when it infused $3 million in December 2015. Full details of Sequoia’s total investment in Pine Labs couldn't be ascertained as a statute of limitation had passed on records of prior investment information. 

Apart from Sequoia, many stakeholders including founding members and senior employees of Pine Labs have also made some significant fortune through secondary events.

From top rung including executive chairman Lokvir Kapoor, who offloaded shares for $23.5 million to software engineer Rahul Agarwal who got around $18.5k after his ESOP shares were transferred out. 

Around 85 different employees across levels made money during secondary transactions in the last five years.

Kapoor is also the biggest non-institutional shareholder in Pine Labs, holding around 6.51% stake worth nearly $98 million in the two-decades-old firm

Likewise, Sanjeev Kumar who is currently the CTO had transferred his stake in three different tranches for $4.38 million and presently holds a stake worth nearly $12 million.

Kanwarpal Singh Aka Vicky Bindra, who left the company in February, transferred all of his equity stakes to Mastercard for $462.5k during the same month. After Singh’s departure, Amrish Rau had joined Pine Labs as a chief executive.

Unlike many in the PoS business, Pine Labs has been a real one, and this could be sense from its financial performance in FY19. According to Fintrackr, the company’s operating revenue had jumped by 48% to Rs 491.63 crore in FY19 as compared to Rs 332.25 crore in FY18.

The acquisition of QwikSilver proved to be a masterstroke. Pine Perks, the gifting platform floated by PineLabs after the purchase of the Amazon-backed firm, accounted for 76.5% sale of products, generating Rs 98.2 crore revenue during FY19. It was about a three-fold jump from the sales of Rs 33.08 crore in FY18. 

Qwikcilver’s co-founder and director Kumar Sudarsan currently holds a stake worth around $8 million in Pine Labs after selling shares worth half a million USD to Mastercard. 

The partial exit of its prime-backer Sequoia and top-rung from Pine Labs is a demonstration of believing in a goal together with a long haul view. That said, since the PoS business has come to a standstill over the past two-and-a-half months due to Covid-19 crisis, Pine Labs along with others in the sector will have to face severe damage in the ongoing fiscal.