Accel Leads Investments of $100 Million in Software Companies

Accel Partners, the first venture firm to back Facebook Inc., led investments of almost $100 million today in two software makers, advancing its strategy of taking shares in later-stage technology companies.

Accel purchased a $60 million minority stake in Sydney- based Atlassian Pty and co-led a $38.5 million investment in New York-based Squarespace Inc., according to statements today. Both companies are at least seven years old and taking institutional money for the first time.

The investments come out of Accel’s $480 million growth fund, which last year bought a stake in Groupon Inc., the online coupon provider that’s valued at $1.35 billion. Atlassian and Squarespace are both profitable and fit into Accel’s plan to help Internet and software companies that are already successful accelerate growth, said Rich Wong, a partner at the Palo Alto, California-based firm.

“You’re starting to see a continued shift toward software technology and toward the Web,” said Wong, who is joining Atlassian’s board. “Mobile, the social Web and software are going to continue to be great categories to invest in.”

Accel, founded in 1983, profited from two of the biggest acquisitions of venture-backed companies last year. Google Inc. bought mobile-advertising company AdMob Inc. for $750 million, and Electronic Arts Inc. acquired social game maker Playfish Inc. for as much as $400 million.

Accel’s biggest boon may come when Facebook sells shares to the public. The firm bought a $12.7 million stake in Facebook in 2005, when the social network had 2.8 million users, less than 1 percent of its current membership.

Eye Toward IPO

Accel’s investments follow a slowdown in venture funding. In the first quarter, venture capitalists invested a total of $4.7 billion in the U.S., compared with an average of $6 billion per quarter since 2005, according to PricewaterhouseCoopers and the National Venture Capital Association. Second-quarter data will be released this week.

In Atlassian, Accel gets a piece of a company that provides software to over 20,000 business customers in 134 countries. The technology helps software developers collaborate on projects and speed product development. Sales at Atlassian jumped 30 percent to $59 million in the year ended June 30, said co-founder Scott Farquhar. The funds will be used to help the company expand into Europe and Asia and make acquisitions.

“We wanted to form a great board around the company with a view toward going public over the coming years,” Farquhar said. Wong will provide industry “expertise, advice and contacts,” Farquhar said.

Squarespace plans to use the $38.5 million in funds for product development and geographic expansion. Accel was joined by Index Ventures, another investor in Playfish, in leading the round. Accel’s Andrew Braccia and Index’s Dom Vidal are joining the company’s board.

Squarespace’s technology is used by tens of thousands of businesses, bloggers and consumers worldwide to create and publish Web pages and analyze usage of the sites.

“We believe in the team, the technology, and the market potential and are excited to be a part of such a fast-growing business,” Vidal said in a statement.

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.