Accel Raises $450 Million for India Fund Amid Startup SlowdownBy
Venture firm brings India assets to more than $1 billion
Venture funding for startups has dropped by about half
At least one venture capital firm has convinced investors there is still plenty of opportunity in India.
The Indian unit of Accel, the venture firm that was an early backer of Facebook Inc., Dropbox Inc. and Slack Technologies Inc., is raising $450 million for a new fund to back early stage startups in consumer businesses, health care, financial technology and business software.
The new initiative, which will take Accel’s existing assets under management in India to more than $1 billion, has nine investment managers leading deals and will start in January 2017, according to Shekhar Kirani, a partner at Bangalore-based Accel India. The fund is a bright spot in a slow year: India tech startups raised $4.23 billion in the first nine months, about half the total raised in the same period in 2015, according to researcher Preqin.
“We have always been early in trying to capture stories where technology can disrupt and create dramatic-growth businesses,” Kirani said.
Businesses that used to take several years to scale, are now doing it in significantly less time, Accel said, adding that it will continue to back its existing portfolio of companies and support their growth plans. In particular, cab bookings, food delivery and home services are embracing e-commerce at a rapid pace, the firm said.
“With 870 million-plus mobile subscribers, 200 million smartphone users, 150 million social-media users, and 60 million transacting users across different online segments, the market is ready for technology led startups to build and scale their companies,” Accel said.
Accel has launched four previous India funds since 2005; the last one was for $325 million in 2015. Among its biggest bets are India’s largest e-commerce startup Flipkart Online Services and TaxiForSure, which was acquired and merged into ANI Technologies Pvt’s Ola. Accel also backed online-ticketing platform BookMyShow and cloud-based customer service startup Freshdesk.
Signs of a slowdown are spreading in India. Ride-hailing service Ola is raising additional funds at a valuation that may be 40 percent lower than the $5 billion level it hit in November 2015, a person familiar with the matter has said. Separately, Flipkart has seen its estimated value marked down by a Morgan Stanley mutual fund for five quarters in a row, implying a valuation for the e-commerce company of less than $6 billion compared with a previous high of $15.2 billion.
"Mutual fund mark-to-market is a purely theoretical exercise and is not based on any real transactions,” Flipkart said in an e-mailed statement. “We are seeing a strong traction in our business momentum and operating performance.”