, the new avtar of Erasmic Venture Fund, the Bangalore-based early and seed stage fund, recently closed their second fund with a corpus of $60 million. Erasmic earlier managed about $10 million and usually invested sub-$1 million in very eary stage companies. VCCircle's Shrija Agrawal caught up with Prashanth Prakash, Partner, Accel India, in an email interview post the fund closing announcement.
Your fund has swelled from $10 million or so earlier to $60 million now. What new can
we expect from Accel Partners now?
There will be a continued emphasis on the seed and early stage space as in our earlier fund. What will be new is our ability to leverage Accel’s global platform: e.g., Accel’s information network and worldwide network of relationships with key individuals, customers and market-leading companies. These networks and Accel’s global brand will give our portfolio companies superior credibility and attractiveness in the marketplace, resulting in recruiting advantages, accelerated sales cycles with key customers, and enhanced ability to strike strategic deals with industry-leading companies.
What is the time horizon for investing this capital?
Four years.
Arent you happy that you raised the fund at the nick of time? By the time crisis became
worse you were already home with fund.
Accel enjoys association with some of the very best LPs around the world. More than timing it illustrates the strong backing Accel’s India initiative has received from our LPs in very turbulent financial times.
In the current economic climate, what kind of deals do you expect in early and seed
stage?
We expect to see more startups that will target consumer and business opportunities for the domestic markets which at this point are relatively more stable and still growing. These will be across many high-growth sectors and not limited to tech products or services.
Dont you think an economic slowdown affects entrepreneurship or new ideas? People
will usually be sceptical about leaving their secure job and starting up especially when
you need staying power to tide over the crisis.
Historically some of the best innovations and ideas have come during economic down cycles. We are yet to see any slowdown in the number of business plans that we receive. That said, the bar for funding in these times will definitely be higher, we can expect only the highest quality teams and ideas to attract venture funding.
What is your advice to the startups you have funded so far on tiding over the current
market slump? You have funded a few social media companies where the business
models are not clear yet. They have a long, long way to go to see a revenue stream.
While there is much talk today on cash conservation, we have always emphasised the need to be capital efficient sometimes even at the cost of growth. Most of our companies are close to cash breakeven and a few are already very profitable. More specifically, our internet companies have focused very sharply on building revenue models that work in the Indian context, and several of them are in sight of being cash breakeven.
Do you see a shift in your investment strategy?
We do not expect any significant shift in our investment strategy.
What are your learnings from the Indian market in the last few years of your operation?
We have worked with more than 20 seed and early stage companies over the last few years. Our experiences suggest the following:
--Staged infusion of capital is the most efficient and beneficial to all parties in the long run
--A number of founding teams do not have prior company building experience, and, thus far, it has been hard to acquire senior management talent from outside
--Active involvement is required from us, particularly for the first 12-18 months post fundin
--Companies need support for strategic & operational help; and key contacts for sales or partnerships
