Accel India, an early backer of startups such as Flipkart and Freshworks, on Wednesday said it has raised $650 million in commitments for its seventh fund to invest in new opportunities like emerging tech across India and Southeast Asia.
"This money we believe is the right size for India and Southeast Asia to build a world class return to our investors. Investing is easy but making our investee companies durable and potentially going public and returning the money is more important," Shekhar Kirani, Partner, Accel, told VCCircle in an interaction.
The seventh fund is higher than the $550 million it raised for its sixth vehicle in 2019 and $450 million it raised for its fifth fund in 2016. Accel's peer Sequoia Capital had received record commitments worth $1.35 billion from its limited partners (LPs) across a venture fund and a growth fund to invest in India and Southeast Asia in 2020.
Kirani said the ticket size of the new fund is expected to be higher although it will also depend on different companies. "There is inflation in general and with the later part of our sixth fund and now with Fund VII our ticket size will be higher. Repeat founders are expecting much higher initial cheques," he explained.
With the latest fund, Accel's commitment to the startup ecosystem in the region has increased to over $2 billion, Accel said in a separate statement.
The new fund will seek to invest in next generation ecommerce, emerging software as a service (SaaS), consumer fintech, global business to business (B2B) marketplaces, digital health and Web3, according to Abhinav Chaturvedi, Partner at Accel.
Talking about Web3, a closely-watched theme among VCs today, Kirani explained that Accel invested in FalconX from the space via its sixth fund. Notably, FalconX was co-founded by Prabhakar Reddy, who was with Accel in 2016-18, and the VC firm worked together on developing the idea with him. FalconX focuses on institutional brokerage of crypto assets.
"Overall, we are excited about Web3 but we are also making sure that the companies that we invest in are of high quality and compliant with regulatory norms," added Kirani.
Accel, which typically comes in at a seed stage and then makes follow-on investments, has been the first institutional investor in more than 87% of all portfolio companies. Flipkart and Freshworks are examples of companies backed by Accel from their initial seed rounds through all subsequent financings.
"Our goal is to find the 40 plus companies that we could get into with this fund where we can protect our pro rata for a longer term in each company. We want to be the first institutional investor and our aim is to get 20% during our investment period in the companies," said Kirani.
Accel has also been the first venture capital firm to back companies such as Acko, Blackbuck, BookMyShow, Bounce, BrowserStack, Clevertap, Curefit, Mindtickle, Moglix, Ninjacart, Portea, Rupeek, Samunnati, StanzaLiving, UrbanClap and Zenoti among others.
In the past years, Accel has been investing in the Southeast Asian region as well. Its investments there include in investing app Pluang and quick commerce startup Astro. "For the last few year we are actively looking to invest in the region. While we don't have a specific allocation we will invest as and when we find good opportunities. The kind of acceleration we are seeing in some businesses there seems to be the right place to invest more in the region. We will continue to spend a lot of time in Southeast Asia from this fund," said Chaturvedi.
Accel also got bumper returns from its bets on Flipkart and Freshworks. Flipkart got acquired by Walmart in the biggest M&A deal in the startup ecosystem in India and Freshworks floated its initial public offering (IPO) last year on Nasdaq.
Earlier this month, Accel India selected 14 startups as part of its first cohort of Atoms programme that was launched last year to make pre-seed funding in startups. Last year, several early-stage VC firms announced fundraising milestones. Chiratae Ventures, Stellaris Venture Partners and WaterBridge Ventures announced the final close of their new funds and Blume Ventures announced the first close.
The fundraising momentum is continuing in 2022 as well. Just last week, early-stage venture capital firm Prime Venture Partners marked the final close of its fourth fund at $120 million.