Accel has announced its seventh India fund, with $650 million to invest as the storied venture investor looks to double down on its bet on the world’s second-largest internet market and also be more aggressive in the Southeast Asia region, two partners told TechCrunch in an interview.
The unveiling of the new fund, whose first set of checks are expected to be wired within weeks, comes less than two and a half years after Accel unveiled its sixth fund in late 2019.
The Silicon Valley venture capital firm, one of the earliest investors in India, has a large portfolio of unicorn startups in the South Asian country. Some of its notable investments include backing Flipkart, which sold a majority stake to Walmart in 2018; Freshworks, which went public last year; top food delivery startup Swiggy; institutional crypto trading and management platform FalconX; used-car marketplace Spinny; online learning platform Vedantu; and business-to-business marketplaces Zetwerk, Infra.Market and Moglix.
In the vast majority of its backings, Accel is the first institutional investor in a startup, said Shekhar Kirani, a partner at Accel. For instance, it participated in the seed financing round of e-commerce firm Flipkart, which was then valued at $4 million post-money. Walmart bought a majority stake in Flipkart for $16 billion. (This helped Accel net more than $1 billion in return from Flipkart, which is now valued at over $36 billion.)
Some of the firm’s top-performing startups put together have exceeded $100 billion in valuation, he said.
Kirani, who has been with the firm for a decade, especially credited the emergence of railroads such as the payments infrastructure UPI and taxation system GST for propelling the growth of the Indian startup in the past decade. The Indian economy, he projected, will surpass the growth seen in the past decade within a few years.
The firm plans to be more aggressive in certain sectors, including web3 and business-to-business marketplaces, said Barath Subramanian, another partner at Accel. The firm, which began investing in Southeast Asia a few years ago, also plans to be more aggressive in the region with the new fund, they said.
Accel today competes with — or as its partners would say, collaborates with — many peer U.S. funds, including Sequoia Capital India and Lightspeed Venture Partners. Unlike many of its rivals, Accel has demonstrably been more conservative, writing few checks and backing away from startups if they don’t think they can work with the founders.
“We have to work with a startup for 10 years. It’s very important for us to know that we all can work together,” he said.
A lot has changed in the Indian startup ecosystem since Accel first arrived in the country. Local firms raised a record $39 billion last year, up from a few million dollars from a decade ago.
But signs are emerging that investors may have been too optimistic in how they priced some startups in recent quarters. Tiger Global, Alpha Wave Global and SoftBank were very aggressive in India last year. The former two won many deals because of the valuation and amount of capital they offered to startups.
The firms also claimed some deals because they did not fight for many future rights. In recent months, as problems begin to emerge in this approach, many investors are beginning to become more conservative again, putting back the future rights and cutting valuations.
“The public market usually sets the tone for private market because eventually all these startups have to go public and have to list at the right valuations. The public market in 2019, 20, and 21 went through the roof in terms of multiples and you saw its reflection in the private market,” he said.
“That valuation multiple also benefited our startups as well. But the only thing I would say is that if you look at our companies, they are all good, durable-unit-economics companies and not fluffy-without-revenue companies. So we have been very cautious and careful as we have been traditionally very conservative. We don’t like our founders go gaga over valuations and keep raising money,” he said.