Accel Reconsiders Its Early-Stage Investment In Indian Startups

Accel is one of the best venture firms in India by any standard. Accel’s track record speaks for itself with around two dozen Indian unicorn startups, including many category leaders. However, the partners in charge of the company’s Atoms early-stage accelerator program are surprisingly reflective about their insights and the adjustments they have been making to increase the likelihood of success.

“A core conviction of ours is that, to a founder, all venture capital firms appear to be the same at some point. In an interview, Accel partner Prayank Swaroop stated, “It’s just money.”

In recent years, all venture capital firms have been more and more focused on identifying the next Flipkart at the seed stage and making early-stage investments in India. The main reason for the change is the recognition that there aren’t many billion-dollar exits from India, therefore venture capital funds need to enter the market sooner to significantly increase their returns.

A fund that invests in startups at different stages may encounter particular obstacles while running an accelerator program. The company may send a bad signal to the industry if it is unable to provide the accelerator portfolio with substantial assistance in upcoming investment rounds. Moreover, seasoned business owners might not believe that an accelerator is the best kind of cooperation for their projects.

These are a some of the issues Accel has been thinking about for almost five years. Prior to Atoms, the venture capital firm experimented with SeedtoScale, an early Accel program, to create a network and knowledge base.

Swaroop told TechCrunch, “We did Demo Days, we were trying to be very similar to a lot of other funds.”

Accel has retraced some of its steps just as quickly as it attempted them. For example, it no longer makes an effort to develop conversations between startups in Atoms portfolio and other investors. Swaroop recalls speaking with a founder who told him that the firm felt like it was being pushed on a treadmill to impress other possible funders artificially during the investor meetup.

Additional open input from founders showed that many felt uncomfortable interacting with industry colleagues who were years senior to them.

“We are trying to find our own unique path, and what has worked for some of the other firms, we think it’s not working for us,” he stated.

This is how that path appears. There are significantly fewer firms in Atom’s third cohort than in other well-known accelerators—just eight. Furthermore, all of the chosen startups are involved in the AI and Industry 5.0 (smart manufacturing) sectors.

Accel offers a value cap of no more than $500,000 in the pre-seed round of investment to each carefully chosen firm. Accel assists startups not only with strategy but also with connecting with industry leaders who may later on become prospective partners and clients.

According to Barath Subramanian, another partner heading Atoms, Accel chose AI and Industry 5.0 as the topics for Atoms because it thinks these two industries would grow significantly over the next ten years.

AI is clearly appealing. As the antiquated plants in India and other places eventually modernize, Subramanian said, Industry 5.0 has become a major topic, opening doors for startups that are introducing efficiencies to share in the tens of billions of dollars that go to consulting companies and other businesses every year. “These factories generate a lot of data, but until now it hadn’t been used,” Subramanian stated.

The growing “China + 1” movement among global giants and New Delhi’s incentives to draw international companies to build their manufacturing operations in the nation have also helped the smart manufacturing sector.

Between 300 and 400 of the more than 800 firms that applied to be included in Atoms 3.0 were AI startups. According to Swaroop, almost two thirds of all pitches were made by AI businesses looking to address issues with marketing and HR. “If there’s too much noise in the market, it’s a signal for us that we should hunt elsewhere,” he stated.

Meritic’s co-founder and CEO, Pallavi Chakravorty, told TechCrunch in a statement that being chosen by Atoms had a significant influence. “Being a part of Atoms has given us a strong founder community and highly collaborative peer group, beyond the capital and learning sessions. “For example, when Meritic encounters a problem, we can reach out to any team at Accel LaunchPad, where we presently work, or to any founder of one of Accel’s more than 200 portfolio companies, to find a solution,” Chakravorty went on.