New founders’ right to win has become difficult as every category is crowded: Accel on Indian startup ecosystem

What kind of response did you get from LPs when you were closing out this fund? And $650 million is the same amount that you raised in 2022 for your seventh fund. Were you aiming for the same number?

Anand Daniel: So, it's been a good season for Accel overall and we're fortunate to close the fund and we aimed for a $650 million fund. We feel it's the right size fund for our early-stage India focus.

You’ve outlined four areas that you will look at: AI, consumer brands, fintech and manufacturing. What segments will you look at within these four areas?

Anand Daniel: On consumer, we're looking at not just brands or consumer tech. We're looking at the Bharat opportunity, what is there beyond the top 50 cities and the population there with more expendable income. There are problems which are very specific to India

The top 20% of people in Bharat spend more than the bottom 50% of urban India. The non-food expenditure in Bharat has surpassed the food expenditure. So, there is more expendable income there.

The second is the access to them in the last five years has gone up digitally. They want the best things that all of us are looking at across India.

Shekhar, what AI trends are you seeing from an investing standpoint? Are we lagging when it comes to investing behind foundational models?

Shekhar Kirani: Our belief and thesis are that there will be more AI services software rather than just software service. Second, it's about taking advantage of nuanced applications being built for global market from India, taking advantage of all the core infrastructure including core LLM models.

India only LLM models, we still need to see it developed. The unit economics of what it takes to build core infra LLMs in India, the amount of money required with the training that is required is so high right now, we don't see a return on that investment yet for building those models from India for India.

But if you can build something nuanced for the global market from India, including the Indian market as the application layer, that's what excites us. We have developed some theses for each of these services and software, and how these vertical apps are being built in India.

How worried are you about the traditional SaaS subscription models in the era of AI?

Shekhar Kirani: I was worried in 2023 a lot more, but in 2025, where we are today, I’m less worried.

The ability to absorb AI and bring AI features into the core products—I’m already seeing all our SaaS companies at scale absorbing it. So, existing use cases where AI can be brought in—all the existing SaaS companies will absorb and do it.

2024 also saw IPOs of Swiggy and BlackBuck. What can we expect in 2025? Because many of your portfolio companies have either filed or are in the process of filing. Many of them are IPO ready- from Bluestone to Infra.Market to Zetwerk. What can we expect in terms of IPOs from the Accel portfolio?

Anand Daniel: There's at least a handful of other companies that are on a scale as well as the preparation with the board and everything is happening.

Shekhar Kirani: Our scale companies, where in 2022 and 23, we had to put so much pressure to say get prepared for IPO. In 2024, it flipped. Founders are putting pressure on us that we want to go and list, help us. So, there's a pull rather than push. That fundamental change is so important for the Indian ecosystem.

In terms of the perception about Indian startups among LPs. A year ago: there was the Byju’s issue, some other startups that were grappling with governance issues. Many VCs we spoke to then said that this was top of mind for LPs. Has that sentiment shifted?

Anand Daniel: I think this year, last year, because of the IPOs and IPO demand, there’s a really good board, there’s good corporate governance, and everything to go through properly—that has happened. I think this time there was less focus, diverse questions, but not as much as we used to get periodically from LPs, those who were visiting us the year before and all that. It used to be top of mind, as you pointed out. So, I think the IPOs have helped allay the fears that, OK, these are good companies, and with good boards and corporate governance, they're able to go demonstrate that they’re able to list and then predictably grow from that. So, less, but still, we need to continue focusing on that.

In terms of the opportunities that you see in e-commerce, quick commerce. You were an early investor in Flipkart, Swiggy. What kind of opportunities do you see there?

Anand Daniel: The Indian consumer has shifted to convenience. Food is different because you have to prepare it. But even there, you’re seeing fast deliveries happen. We’re seeing a bunch of startups trying to do various verticals, be it beauty, personal care, or fashion, pharmacy, everything in 10 minutes. So, it’s a good time to be an Indian consumer sitting at home and ordering and getting everything.

So, there's going to be multiple opportunities, multiple large platforms getting created, or at least brands, for that matter. So, it’s very case specific. We are looking at a lot of startups, and I must talk to a lot more who are trying to make convenience the core and value and balance that against the price and the offerings.

In terms of developing the next generation of leaders at Accel, Subrata Mitra and Prashanth Prakash have been the face for a very long time. Will they continue to have an active role? What plans do you have in terms of succession planning for Accel as a fund?

Anand Daniel: So, Subrata, Prashant, and Mahendran started Accel in India, and they continue to be actively involved in investing and mentoring.

Shekhar and I joined around about the same time. Then Abhinav, Prayank, and Bharat joined, which is the next layer of partners. And I'm saying layer because these are different vintages when we joined and became partnerships. And then there's Rachit and Prateek, who are principals there.

So, over the last 15-16 years, we have tried to hire people. I joined as a principal and then worked with the firm and then grew with the firm over a period. And we're happy that, as a team, we stuck together and grew along with the industry.

Shekhar Kirani: The most important thing is that we're building both breadth and depth in the organization. And we're ensuring that the culture of being founder-friendly, founder-first, being humble, and doing the work that is required in the market is kept intact. So, whatever we learned from Prashanth, Mahendran, and Subrata, we're ensuring that it continues to happen in the overall Accel behavior pattern in India.

In terms of the vintage of entrepreneurs today, the prominent ones are folks who started up in 2012, 2015. So, where is the next Sachin Bansal/Binny Bansal? The next Girish Mathrubootham? The next Deepinder Goyal and Sriharsha Majety? Are we seeing the founders of that DNA?

Shekhar Kirani: What we used to see a decade back to now, we are seeing a lot more high-quality founders in high volume, coming up with very ambitious, unique ideas, and pitching and saying that they want to raise. So, the good news is supply is phenomenal.

The bad news, in my opinion, is it feels every category is occupied. Every existing category, the existing founders are also continuing to build scale and ambitions and they want to expand their wings. They want to take more.

So, what is the right for these new founders to win? That requires a lot more nuanced thinking, both as investors as well as for founders to put that thesis together compared to what we used to see in 2015.

The new founders, even though they're ambitious and smart, must be a lot more focused, a lot more on where they're going to differentiate.