Accel raises $650 mn in 8th India round to back 'disruptive' businesses

Accel- Group

Venture capital firm Accel on January 6 announced that it has raised a $650-million (around Rs 5,500 crore) early-stage fund, its eighth in India, to back “disruptive and category-defining” businesses.

With this fund, Accel plans to focus its investments in key sectors like artificial intelligence (AI), consumer, fintech, and manufacturing, the company said in a statement.

Its AI investments will primarily go towards areas like enterprise AI, software-as-a-service (SaaS) firms, and vertical AI companies that are developing applications tailored for specific industries and use cases.

Regarding its consumer bets, Accel will look to back non-conventional companies building from non-metro cities, and aspirational brands that are aiming to capitalise on “the increasing discretionary spending of India's consumption-first Gen Z demography”.

According to Prayank Swaroop, partner at Accel, these sectors are among those that are reshaping the needs of India’s rapidly evolving market. “India is at an inflection point. Over the next decade, we are poised to add more to our GDP than we have in our economic history. The surface area of the opportunity for Indian founders to build and scale businesses that deliver large-scale impact is huge,” he said. “We believe the next wave of category-creating companies will come from those who can combine innovation with a deep understanding of customer needs.”

In terms of fintech investments, Accel plans to focus on wealth management startups, and fintech infrastructure – which includes startups bringing banks and fintechs together to enable seamless digital experiences for consumers and businesses. It will also back companies accelerating distribution of financial products by leveraging India's digital public infrastructure.

Lastly, for its investments in the manufacturing realm, Accel will look to back Indian startups catering to global demand, as well as native companies focused on value-added manufacturing.

The size of Accel’s latest fund – $650 million – has remained the same as its previous seventh fund which it had raised in 2022. The new fund has also come weeks after two of its portfolio companies, Swiggy and Blackbuck, went public.

In fact, Swiggy’s $1.35-billion IPO was one of the largest for new-age companies since Paytm’s $2.4-billion public market debut in 2021.

Accel earned a whopping 35-fold return on its $20-million investment in the food delivery major. From 2015 to 2017, Accel participated in six consecutive rounds of funding, backing Swiggy as it doubled and quadrupled in valuation each time.

“Indian founders have built resilient and enduring businesses which have been embraced by the public markets. As India’s GDP and public market cap grow, we expect large outcomes from disruptive businesses led by bold and visionary founders,” said Shekhar Kirani, partner at Accel.

The venture capital investor has also been the first VC firm to back Flipkart in its early days when the company was valued at a mere $4 million. The e-commerce company was sold to US retail major Walmart for $16 billion in 2018.

While most investors had sold their shares in Flipkart, Accel, unlike most other investors, had retained a small 1.1 percent stake even after the acquisition, only to fully exit the company in 2023. In entirety, Accel generated cumulative returns of around $1.5-2 billion, generating a 25-30x return on its $60-80 million investment over the years.

Flipkart and Swiggy aside, Accel has also invested in companies like Freshworks, Cure.fit, Mensa Brands, Myntra, BookMyShow, Urban Company, Zetwerk, and Zenoti.

Accel’s new fund comes at a time when several venture capital firms are also raising capital, as the macroeconomic environment continues to improve.

Like Accel, its peer A91 Partners is also in the process of raising around $700 million in its largest fund yet as investors double down on India, the world's third-largest startup ecosystem. While Accel and A91 Partners are raising new funds, others such as Peak XV Partners has trimmed the size of its fund.

Peak XV Partners has reduced the size of its $2.85-billion fund by 16 percent – roughly $465 million – as it looks to deploy capital more judiciously and return uninvested monies to its sponsors or limited partners (LPs), amid a buoyant public market and its rub-off in private market valuations, Moneycontrol had reported earlier.

Regardless, venture capital firms are expected to increase their investments in 2025 compared to the previous year, by allocating the billions of dollars in dry powder, or unallocated capital, that they are sitting on.