Accel keeps funding size for its eighth vehicle in India at $650 million, even as other ventures in the region compete to raise increasingly large pools of funding .
Accel partner Shekhar Kirani said in an interview with TechCrunch that the company has ample opportunity to raise “billions of dollars.” But unlike its peers who have supersized their funds, Accel remains stable based on a calculated analysis of India's venture opportunities.
Peak XV raised $2.5 billion as the latest set of funds for the region, while Lightspeed has nearly doubled its India fund to $500 million in recent years. Stellaris launched in 2017 with $90 million and recently announced a third fund of $300 million.
“We've done a lot of historical research in the United States and China. Historically, when funding exceeds $600 million to $650 million, even in established markets, high-quality It will be very difficult to build a return on that,” Kirani said.
The strategy mirrors that of the U.S. benchmark, which has delivered significant returns for decades while maintaining relatively small fund sizes. According to industry estimates, Accel consistently delivers the highest returns among venture funds in India, often by a wide margin. One notable success story is Swiggy, a food delivery startup whose first institutional investment was led by Anand Daniel at a valuation of $2 million. Swiggy went public in November at a valuation of $11.3 billion, becoming the biggest global technology IPO of 2024.
The company's discipline derives from its analysis of startup opportunities in India. Accel estimates that approximately 300 high-quality companies emerge every year from pre-seed to Series A stages. Of these, we aim to support a total of approximately 40 to 60 to 70 investments per fund cycle.
“We want to be able to raise early-stage funds that are appropriately sized and generate good returns,” Daniel said, adding that beyond a certain point additional dollars are raised. He pointed out that each time the company moves forward, it becomes difficult for the company to deliver its targeted returns.
Indian accelerator partners Anand Daniel (left) and Shekhar Kirani. Image: Axel
The approach comes as other Silicon Valley ventures reevaluate their India strategies. Sequoia and Matrix recently separated from their Indian affiliates. However, Axel is putting even more effort into its hybrid model. “Either we have a completely independent fund or we just have a common name and everything is decided centrally,” Kirani said. “What we have at Axel is the perfect combination.”
One place this strategy becomes apparent is when the Accel team in India is able to raise global growth funds and write large checks to Indian startups, Daniel said.
The company's commitment to India spans over 15 years, a period that has seen global ventures enter and exit the market. India has emerged as one of the last big growth markets for internet companies, but companies like Battery Ventures and Omidyar are shifting their focus.
Returns are a persistent concern for the industry. “India's return on capital is the worst in history,” Scott Schleifer, a partner at Tiger Global, told founders in 2023. The market's fortunes are changing. A record 13 Indian startups went public last year, and 25 more are preparing to go public, TechCrunch previously reported. This year, 10 Accel-backed startups could make the list.
As India's digital infrastructure matures, questions are arising about the next wave of opportunities. Indian startups have not traditionally excelled in specific areas such as cybersecurity, but both partners note that the entrepreneurs and market are maturing. As AI streamlines software development globally, there are also questions about whether India's traditional advantage of providing comparable services at lower costs will continue.
Accel's latest funds reflect these evolving opportunities. The company, which is behind Flipkart, Myntra and Freshworks, is betting on wealth tech startups in urban India and software companies building niche products on AI platforms.
It is also increasing its focus on smaller towns and villages, which the company believes are home to the next wave of unicorns, which it calls 'Bharat'. “There's a perception that rural areas are poor. But when you look at how much the top 20% to 30% spend there, it's very significant. We estimate it to be over $250 billion. '' Daniel said, adding that the top fifth of these markets often spend more than half of the city's population.
Startups that expand into urban India may ultimately not be able to replicate their success in Bharat, the partners warned. If consumer behavior does not change in rural India, incumbents will do well, Kirani said. “However, if the other person's values are different, you might want to be a little more accommodating.”