Marquee silicon valley venture capitalist Accel Partners, best known for its early investment in Facebook, has scrapped plans to raise $400 million India-focused fund due poor market conditions and increased competition among private equity investors in the country. Accel's proposed fund would have invested larger tranches of growth capital in mature business, unlike early stage venture funding it does in India currently.
Accel Partners had roped in prominent fund managers from biggies like DE Shaw, Apax Partners and Goldman Sachs to lead the India growth fund. A senior Accel Partners official confirmed rolling back plans for a larger fund in India. Accel, however, will continue making early stage investments in "category defining" start-up firms in the country.
Accel has invested in multiple e-commerce start-ups riding the second wave of India's consumer Internet story. Accel's start-up funding has been in areas of technology, internet, education and biotech.
Former India head of Apax Partners Neeraj Bharadwaj, Prateek Dhawan, who spearheaded private equity investments of Goldman Sachs, and Vineet Sachdeva from DE Shaw had boarded Accel Partners for its larger fund operations. Sources said Bharadwaj and Dhawan would continue with Accel for the time being at least. Sequoia Capital, another Valley investor and a peer of Accel, has a bigger play managing $1.4 billion fund in the country.
There has been a jostling among private equity firms to invest in one of the few growth economies, which in turn has distorted valuations of emerging businesses in India. This combined with prevailing poor market conditions have prompted may investors into private equity industry turn cautious. Many private equity professionals had quit their jobs to raise a fund of their own adding to a crowded market which has about 400 funds.
Some have found the going tough and have withdrawn their fund raising plans. A few Indian corporates like Jubilant Group, which had looked at sponsoring funds, too have shelved their moves.
Accel, a pedigree early stage investor, has raised large private equity funds in recent years and operated a joint venture with Kohlberg Kravis Roberts & Co to acquire middle rung technology and IT services firms.
The proposed India fund wanted to strike investment deals of up to $50 million in growth businesses in contrast to venture investing that is usually below $10 million.
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