Accel has maintained its India fund size at $650 million for its eighth vehicle, even as other venture firms in the region are racing to raise increasingly larger pools of capital.

The firm had ample opportunity to raise “multi-billion dollars,” said Shekhar Kirani, partner at Accel, in an interview with TechCrunch. But unlike peers who have supersized their funds, Accel is holding steady based on a calculated analysis of India’s venture opportunity.

Peak XV has amassed $2.5 billion in its newest set of funds for the region, while Lightspeed has nearly doubled its India fund to $500 million in recent years. Stellaris, which launched in 2017 with a $90 million fund, recently announced its third fund at $300 million.

“We have done a lot of historic studies in the U.S. and China. As funds go beyond $600-$650 million, historically, even in well established markets, building high quality returns becomes extremely hard,” said Kirani.

The strategy mirrors that of U.S. firm Benchmark, which has maintained relatively small fund sizes for decades while delivering outsized returns. According to industry estimates, Accel has consistently delivered the strongest returns of any venture fund in India, often by a significant margin. One notable success is food delivery startup Swiggy, where Anand Daniel led the first institutional investment at a $2 million valuation. Swiggy went public in November in what was the largest global technology IPO of 2024, at a valuation of $11.3 billion.

The firm’s discipline stems from its analysis of India’s startup opportunity. Accel estimates roughly 300 high-quality companies emerge annually at pre-seed to Series A stages. Of these, it aims to back about 40 through 60-70 total investments per fund cycle.

“We want to raise the right size early stage fund to be able to generate good returns,” said Daniel, noting that each additional dollar raised beyond a point makes it challenging to deliver the returns the firm targets.

Accel, a renowned venture capital firm, has been a driving force behind the growth of numerous successful startups in India. With a proven track record of investing in companies like Flipkart, Swiggy, and Freshworks, Accel has established itself as a key player in the Indian startup ecosystem. Despite having the potential to raise billions of dollars for India, Accel has opted to stick to its current fund size of $650 million. In this article, we will delve into the reasons behind Accel’s conservative approach and explore the implications of this decision for the Indian startup ecosystem.

Background: Accel’s Investment Strategy in India

Accel has been investing in Indian startups since 2005, with a focus on early-stage companies in the technology and consumer sectors. The firm’s investment strategy is centered around identifying and backing entrepreneurs with a strong vision and a passion for building scalable businesses. Accel’s investments in India have yielded impressive returns, with several of its portfolio companies going on to achieve significant success and scale.

Why Accel is Sticking to $650 Million

Despite its success in India, Accel has chosen not to increase its fund size, opting instead to stick to its current $650 million allocation. There are several reasons behind this decision:

1. Focus on Quality Over Quantity: Accel’s investment strategy is centered around identifying and backing high-quality entrepreneurs and startups. By sticking to its current fund size, Accel can maintain its focus on quality over quantity, ensuring that it only invests in companies that have the potential to achieve significant scale and success.
2. Avoiding Over-Capitalization: Accel’s conservative approach also reflects its desire to avoid over-capitalizing its portfolio companies. By not increasing its fund size, Accel can ensure that its investments are tailored to the specific needs of each company, rather than simply providing excessive capital that may not be utilized effectively.
3. Maintaining a Disciplined Investment Approach: Accel’s decision to stick to its current fund size also reflects its commitment to maintaining a disciplined investment approach. By not feeling pressured to deploy larger amounts of capital, Accel can maintain its focus on investing in companies that meet its strict investment criteria, rather than simply investing for the sake of deploying capital.

Implications for the Indian Startup Ecosystem

Accel’s decision to stick to its current fund size has several implications for the Indian startup ecosystem:

1. Increased Competition for Funding: With Accel maintaining its current fund size, the competition for funding among Indian startups is likely to increase. This could lead to a more competitive landscape, with startups needing to demonstrate stronger fundamentals and growth prospects to secure funding.
2. Greater Emphasis on Quality and Scalability: Accel’s focus on quality over quantity is likely to have a ripple effect throughout the Indian startup ecosystem. Startups will need to demonstrate a clear path to scalability and profitability to attract funding, leading to a greater emphasis on building sustainable businesses.
3. Opportunities for Other Investors: Accel’s decision to stick to its current fund size creates opportunities for other investors to enter the Indian market. This could lead to increased investment activity in the region, as other firms seek to capitalize on the growth potential of Indian startups.

Conclusion

Accel’s decision to stick to its current fund size of $650 million reflects the firm’s commitment to maintaining a disciplined investment approach and focusing on quality over quantity. While this decision may increase competition for funding among Indian startups, it also creates opportunities for other investors to enter the market. As the Indian startup ecosystem continues to evolve, Accel’s conservative approach is likely to have a lasting impact on the region’s investment landscape.

Accel, a renowned venture capital firm, has chosen to stick to its current fund size of $650 million for India, despite having the potential to raise billions of dollars. This conservative approach has several benefits for Accel, its portfolio companies, and the Indian startup ecosystem as a whole.

Benefits for Accel

1. Maintaining a Disciplined Investment Approach: By sticking to its current fund size, Accel can maintain its focus on investing in high-quality companies that meet its strict investment criteria.
2. Avoiding Over-Capitalization: Accel’s conservative approach helps avoid over-capitalizing its portfolio companies, which can lead to inefficient use of capital and decreased returns.
3. Preserving Investment Team’s Focus: With a smaller fund size, Accel’s investment team can maintain its focus on supporting existing portfolio companies, rather than being distracted by a large number of new investments.

Benefits for Portfolio Companies

1. More Focused Support: With a smaller fund size, Accel can provide more focused support to its portfolio companies, helping them navigate challenges and achieve their growth goals.
2. Better Alignment with Company Needs: Accel’s conservative approach ensures that investments are tailored to the specific needs of each company, rather than simply providing excessive capital.
3. Increased Accountability: With a smaller fund size, Accel’s portfolio companies are more likely to be held accountable for their financial performance and growth prospects.

Benefits for the Indian Startup Ecosystem

1. Increased Competition for Funding: Accel’s conservative approach creates a more competitive landscape for Indian startups, encouraging them to develop stronger fundamentals and growth prospects.
2. Greater Emphasis on Quality and Scalability: Accel’s focus on quality over quantity promotes a greater emphasis on building sustainable businesses that can scale efficiently.
3. Opportunities for Other Investors: Accel’s decision to stick to its current fund size creates opportunities for other investors to enter the Indian market, increasing the overall availability of capital for Indian startups.

Benefits for the Indian Economy

1. Job Creation and Economic Growth: Accel’s investments in Indian startups can lead to job creation and economic growth, contributing to the country’s overall development.
2. Increased Innovation and Entrepreneurship: Accel’s focus on supporting innovative startups promotes a culture of entrepreneurship and innovation in India, driving progress and development.
3. Improved Competitiveness: Accel’s investments in Indian startups can help them compete more effectively with global peers, promoting India’s position as a hub for innovation and entrepreneurship.

Conclusion

Accel’s decision to stick to its current fund size of $650 million for India has several benefits for the firm, its portfolio companies, and the Indian startup ecosystem as a whole. By maintaining a disciplined investment approach, avoiding over-capitalization, and promoting a greater emphasis on quality and scalability, Accel’s conservative approach can drive sustainable growth and development in India’s startup ecosystem.