Accel secures $650 million for new fund; will continue to focus on early-stage investments

Accel, an early stage venture capital firm that has backed the likes of Flipkart, Swiggy, Freshworks and Browser stack, said it has launched a $650 million seventh fund to back startups across India and Southeast Asia. The new fund comes three years after it mopped up $550 million as the VC firm continues to focus on early, seed and preseed stage startups, according to senior executives at Accel. The total commitments for Accel in the region have now crossed $2 billion.

Famous for being an early Facebook backer, the Palo Alto headquartered fund’s latest corpus will be the second largest raised by a venture capital firm to invest in India and Southeast Asia after Sequoia India which picked up $1.35 billion in 2020 to back early and growth stage startups. Sequoia is expected to close a much larger fund at around $2.8 billion.

“We will continue to back companies in sectors such as consumer tech, global software as a service companies(Saas), healthcare and ecommerce," said Anand Daniel, partner, Accel India.

Its portfolio firms are valued at more than $100 billion in all, Daniel said. According to the firm, 16 out of the 18 companies that are currently valued at over $1 billion, commonly known as unicorns, saw Accel coming as their first institutional investor. As much as 90% of the latest fund corpus will be deployed in the early stages, Daniel added.

Amid growing competition to be the first to catch fledgling startups Accel launched its preseed investment programme Atoms where it backs companies at the idea stage. The fund also runs Seed To Scale, which is a platform targeted at seed stage founders. Sequoia has been running its Surge programme since 2019 which too is tapping the seed and pre-seed market.

Abhinav Chaturvedi, partner at Accel said the firm will increasingly look at backing companies in the crypto and Web3 segment. “We will see applications that bridge the gap between Web2 and Web3 and will double down on our focus on Crypto,” Chaturvedi added.

Accel’s big bet in cross border enterprise software and software-as-a-service( SaaS) sector paid off with the Freshworks IPO on Nasdaq, last year. But with the current crash in tech stocks across global and Indian public markets, many tech startups have delayed their IPO plans. Chaturvedi, however, said that exits for early investors in India through an IPO is here to stay. He said it’s an irreversible trend, adding that exits will also come through M&As and secondary sale of shares by early investors.

The option of capital markets for technology companies to list has opened up. It is just a matter of timing. We are seeing many late stage companies preparing to go public, it is a six month to a year journey, Daniel added. As for backing more mature companies with growth capital, where it competes with larger sized funds, Daniel said they will dip into Accel’s global pool of capital of around $4 billion $4.5 billion available across its growth funds.

The flush of liquidity in the global market has led to larger India-dedicated funds being raised. With domestic institutional investors also coming of age, the pools of capital available for the Indian startup ecosystem has expanded. Funds such as 3one4 Capital, A91 Partners, Chiratae, Blume, Stellaris among others have raised larger pools of capital to invest in the early stage companies in the local market.