The tech-tonic trail of Accel: 40 years of fostering iconic, global tech companies

Accel hit a big milestone of completing 40 years as a global fund and 15 years in India in 2023. The podcast series SeedToScale Specials traces the firm’s formidable history and delves into time-tested lessons from the firm’s playbook for present-day players and stakeholders of the venture capital and startup ecosystem. This is especially insightful amidst a funding winter, which has led to Indian startups correcting courses toward building resilient business models to achieve sustainable growth.

In this podcast, Anand Daniel speaks to three partners at Accel: US-based Sameer Gandhi; UK-based Harry Nelis, and Bengaluru-based Mahendran Balachandran to delve into the four-decades-and-counting journey of the global venture capital fund which has enabled several entrepreneurial success stories.
Global, Borderless Companies
A hallmark of Accel’s journey, the partners add, is its legacy of fostering global, borderless companies by leveraging the firm’s vast depth and range of global domain experts to deliver the maximum value for their founders and limited partners. Indeed, Accel has been at the forefront of shaping a culture of global collaboration and knowledge sharing in tech investing to accelerate the proliferation of cross-border tech innovations and disruptive businesses.

“I think the biggest collaboration globally is the Leaders Fund, which is the pre-IPO fund, for lack of a better term. And what I liked about that was that a number of partners from the US, a number of partners from London, and India, all worked together on new opportunities and existing portfolio companies. So it was a time especially in the beginning, when there were a number of investments that we did in our own portfolio companies, where I really got to understand Swiggy, for example, or other businesses that I'd heard of before, and I knew they were doing well, but to see really the matrix and to really discuss it amongst each other was just amazing,” says Nelis.

Flipkart, in which Accel first invested in 2009, is one example of a successful co-investment for the global VC firm, demonstrating the power of teamwork to support visionary companies, say the partners. Accel, both India and US teams, had held over 20 percent stake in Flipkart, after pumping in an initial investment of around $1 million in 2008 and over time taking that up to a total of $100 million in investments in the company founded by Sachin Bansal and Binny Bansal in 2007. In 2018, the VC firm clocked mega returns of about $1 billion when it sold a partial stake in Flipkart during Walmart’s $16 billion acquisition of the ecommerce company. More recently, Accel fully exited its remaining 1.1 percent stake in Flipkart, generating cumulative returns of $1.5-$2 billion, an estimated 25x-30x return on investment.

Freshworks, previously Freshdesk, is another example of successful cross-border collaboration across the global VC firm. Freshworks made history as the first-ever Indian software-as-service startup to list on the US stock exchanges in 2021. As the first investor in Freshworks, Accel led its seed investment in 2011 and subsequently participated in or led every other funding round. Today, Freshworks is a global SaaS company with revenues of over $500 million and customers of over 50,000 across the world.

Indeed, the global VC firm’s deep local presence in exciting markets coupled with a culture of curiosity, preparation, research, and domain expertise, has enabled it to move quickly across its global teams to back exceptional founders building category-defining businesses like Flipkart, Swiggy, Freshworks, and BrowerStack in India among other global companies like Slack, Spotify, Atlassian, and Chainanalysis.

“The markets have become global so much faster. And tech companies are borderless now. And that wasn't the case earlier. So we would collaborate by sharing insights or information. Now, any company that you talk to, they care about Europe, they care about Southeast Asia; in India, they care about North America, South America; so, you know, there's a reason for us to collaborate on almost any investment today,” says Gandhi.

Great time to start a new business
All three partners highlight the increasingly interconnected startup landscape, with companies originating from various regions collaborating and expanding internationally.

“Today is a great time to start a new business. And we'd love to partner with you. We'd love to provide you with the support that we can do around the globe, whether it's the US or Europe or India. And we really look forward to working with young entrepreneurs and more experienced entrepreneurs, building really important businesses, and we like rolling up our sleeves and helping you do it,” says Nelis.

Today, Accel has a diverse global portfolio of over 1000 investments across a range of sectors including travel tech, insuretech, direct-to-customer (D2C), business-to-business (B2B) marketplaces, software-as-a-service (SaaS) SaaS, logistics, crypto, Web 3.0, foodtech, healthtech, edtech, and e-commerce, among others.

Top Strategies for Startup Success

1. Focus on getting one thing right
   Sharing key fundamental lessons and messages for aspiring and existing entrepreneurs navigating the big challenges plaguing the Indian startup ecosystem, the partners emphasise the importance of developing a sharpened ‘focus on getting one thing right at one time,’ rather than diluting their efforts across multiple areas.
2. Stick to the organisational DNA
   Startup founders should stay true to their business’s core DNA, regardless of the availability of funding, advise the Accel partners. Funding, they add, should not lead founders to deviate from their core business model.
3. Fundamentals over Vanity Metrics
   The partners delve into key characteristics they admire in successful entrepreneurs and share best practices and lessons learned from working with successful founders. The first, they say, is being realistic about the business's challenges and addressing them head-on. They also emphasise the need for founders to prioritise getting the business fundamentals right and growing in a sustainable manner, rather than just focusing on vanity metrics.
4. Build strong teams, stakeholders
   The partners also emphasise the importance of building strong teams and leveraging their potential to multiply the company's impact.
   The partners also emphasise the importance of building strong teams and leveraging their potential to multiply the company's impact.

The Year of the Great Reset
When host Daniel pivots to the concept of a ‘year of reset’, the partners share their perspective on the trends dominating the startup landscape and the metrics that are now governing investment decisions.

Funding the best companies
Nelis says, “Reset in my mind means getting back to business. I think we need to realise that the last two or three years in which the Fed and other central banks kind of flooded the market with money really had a distorting effect on our business and in a way that capital did not flow to the best project. But many projects were funded that probably should not have been funded. So now when that water, when that money is kind of ebbing back, we're getting back to the old paradigm where money is going to continue to make its way to companies and projects that deserve it, but will not to companies that probably should not exist.”

More time for more informed investment decisions
While the later-stage funding activity remains slow, there's now an opportunity to build stronger relationships with entrepreneurs, take time to understand businesses thoroughly, and make more informed investment decisions, say the partners. This nuanced and rooted approach is now replacing the earlier rushed deal-making approach where full comprehension of a business might be challenging within a short timeframe, they add.

Time to build foundational businesses
Balachandran discusses the cyclic nature of the market and the need to revert to sustainable profits and responsible cash management during periods of correction, while Gandhi highlights the positive aspects of this phase, emphasising the importance of building foundational businesses with solid teams, strong margins, and cash generation.
Gandhi suggests that this is an opportune time for serious entrepreneurs to distinguish themselves from less committed players. “From the entrepreneur perspective, if you go back in time and just do a study of when the really foundational companies were started; they had to survive through a more difficult period in time where capital is not free, or inexpensive, or it's hard to come by, and you have to show profits, so your underlying business has to really work, because it has to have great margins and generate cash. And you have to really focus on building great teams and all the things that are just foundational, fundamental building blocks. And so I think if you want to start a company today and you can make it through this, you have a really strong business on the other side and a chance to build something that's really really special and sustainable. So we like it. And I think entrepreneurs should look at this as their time to separate from all the people that are not really serious. And the serious ones are gonna win,” says Gandhi.

Nelis adds, “And there's still a lot of money around to fund new entrepreneurs and businesses, right. So a lot of money has been raised. And venture funds are very sticky. So that money is still around, just looking for great, great new entrepreneurs and great ideas.”

All three partners surmise that despite corrections, there is still ample capital available for innovative entrepreneurs. They predict a resurgence of late-stage activity and adaptation to the new reality. They also mention how India's different approach during the pandemic, focusing on infrastructure over consumer stimulus, has led to a revival in the country's capital cycle, while drawing attention to India's unique economic cycle and its current booming environment due to strategic decisions made during the pandemic.