Continuing its global expansion, Accel Partners is teaming with an seed stage Indian venture shop to raise a $60 million India fund this year.
The modest size of the Accel India Venture Fund is due to its strategy of focusing on seed and early stage investments of as little as $100,000 to “a couple of million,” says Peter Wagner, a U.S.-based partner who helped lead Accel’s India initiative.
The deals Accel is looking at in India “are quite capital-efficient, so you would impede progress if you overcapitalize them,” Wagner says. “Some of these companies will get all the way to cash flow break on even a couple hundred thousand dollars.”
While the new fund is getting lots of interest from new existing limited partners, the “range of $60 million is something we’re pretty set on,” Wagner notes. “It could move a little bit, although we don’t want to make the mistake of raising too much capital given what we’re trying to do.”
Accel expects to finish fund-raising by the end of the year. The bulk, if not all of the LPs, are expected to come from investors in Accel’s other funds and Erasmic Venture Fund, the Indian fund Accel teamed with to create Accel India Venture Fund. The $10 million Erasmic fund has commitments from high net worth individuals, institutional LPs and at least one major corporation, Google, Wagner says. It is “still to be determined” whether Google will be in the new fund, he adds.
Accel India will be managed by the four partners of Erasmic: Subrata Mitra, Prashanth Prakash, Mahendran Balachandran and Gagan Kumar. All of the partners will receive carry from the new fund, Wagner says, adding, “We’re big believers in giving autonomy and ownership to the team on the ground that is investing in their market.”
Before settling on teaming with Erasmic, Wagner and other Accel partners spent at least a couple of years studying the India market, meeting with entrepreneurs and investors working at all stages.
“We weren’t necessarily trying to identify a specific team we could work with,” Wagner says. “We also considered building a team from scratch. As it turned out, we developed a lot of respect for the Erasmic team as individuals and the work they’re doing with their portfolio companies.”
With the addition of the fund in India, Accel now has venture funds in the United States, Europe, Israel and China. —Lawrence Aragon