Accel Partners launches a new $305M fund to invest in early stage Indian startups

Accel Partners, the globally renowned VC fund known for backing companies like Facebook, Dropbox and others in the valley and Flipkart, BookMyShow and others in India has announced the launch of their new India fund, Accel India IV, a $305mn fund, dedicated to invest in very early stage Indian startups and to work closely with the Indian entrepreneurs to help build their businesses from the earliest days.

Prior to this fourth fund, Accel had previously raised $155mn as part of Accel India III in 2011 and $60mn as part of Accel India Venture Fund II in 2008 right after the merger with Erasmic Venture Fund to form the current Accel Partners India.

In its decade old existence in India, Accel has backed many startups that have now grown to become big brands like - BookMyShow, CommonFloor, Flipkart, Forus Health, FreshDesk, Mitra Biotech, MuSigma, Myntra, Power2SME, Proptiger and TaxiForSure. And have had successful exits with Myntra (acquired by Flipkart), TaxiForSure (acquired by Ola) and Virident (acquired by Western Digital).

Speaking on the new fund launch, Subrata Mitra, Partner at Accel Partners shared with YourStory that the sector focus and investment philosophy of the new fund is going to remain the same as previous funds.

“The sectors are similar to what we had before: Commerce, Global SaaS, and Healthcare, but looking at technology focused companies only. One slight shift is that we could opportunistically do a few larger checks, in the same areas listed above.” – said Subrata.

With the infusion of large amount of capital from global investment firms like Softbank’s $210mn investment in Ola and $90mn in Housing.com, and Alibaba’s $575mn investment in One97 - it definitely shows that there is more interest in India from many large players for now. While few speculate it might be a bubble, Subrata shared that - they do believe in the Indian startup success stories, but he agrees that valuations have grown faster in the last few quarters than ever before. And at Accel their focus areas continues to be early stage tech, and he believes they’ll continue to be very unique for the kinds of companies they want to partner with.

Fund raising is a daunting task be it for the entrepreneurs raising funds for their ventures or the partners raising investments for their new fund. Given the buzz created around the Indian startup space, was convincing the Limited Partners (LPs) for the new Accel India IV fund an easy job for the partners? Looks like the buzz did help a bit. Subrata shares – “At Accel, we’ve had the privilege of working with some of the most well-known & long-term LPs globally. That said, there was definitely more pull for India this time than ever before.”

On the evolution of the Indian Startup space in the last decade, Subrata says -

“The last decade has been quite a journey, and we at Accel feel privileged & excited to be a part of it. The ecosystem has changed significantly, in terms of kinds of companies being built, the age, agility & risk appetite of the entrepreneurs, and the number & quality of co-investors we work with. Good companies are starting to accelerate faster. Overall thought, we believe it’s still early and we would see more acceleration & interesting companies in the future.”

And as advice to entrepreneurs on how they should choose the right VC or Investment partner, Subrata shares – “Really depends on the stage & kind of company that they want to build. We believe we do very well as hands-on partners, helping entrepreneurs decide on product/market fit, go-to market strategy, team building & initial scale, etc. One thing I do suggest to entrepreneurs is to do their own complete diligence on their potential VC or Investment partners.”

This is the latest in the new fund announcements by Indian VCs which includes SAIF Partner’s $350mn new India fund launched earlier this year and Sequoia Capital’s $530mn India focused fund launched last year.

The growth of smartphone usage in India seems to fuel the starting up of many Marketplace and Consumer Internet related ventures in India and we are seeing quite a bit of investment activity in these spaces as well. With many global players like Amazon and Alibaba also looking to have a piece of this action – it’s one of those good times to venture out and startup!

Also read - Accel's follow-on investment in Teabox along with JAFCO, Dragoneer and Keystone