Anand Daniel, a partner at VC firm Accel, believes that marketplace start-ups can have a huge impact on Tier-3 markets and beyond in India and he personally spends more time on start-ups working in these areas. 

“If you look at the next decade, more than 500 billion of consumption will come from Bharat and the role of start-ups in that, is something that I personally am spending a lot of time on,” Daniel told businessline. He is also excited about Indian start-ups going global in the consumer space. “For instance, can the next Airbnb come out of India? It’s a question that I have because the quality of founders, quality of tech and product talent in India is world-class. So it will be exciting to see more and more of that also happen,” he added. 

In 2022, Accel launched ‘Decoding Marketplaces’, a digital repository of experiences in backing successful marketplaces. The initiative is designed to help entrepreneurs identify the building blocks of successful marketplaces and gain experience from their peer group. Accel has invested in marketplaces like Flipkart, Zetwerk, Urban Company and others. 

Reasons for success

Talking about reasons for the success of marketplaces in India, Daniel said, “Things like technology and penetration of mobile internet, payment rails that are needed for transactions to go through and logistics networks — all of these didn’t exist in India earlier on but India is now caught up on these things. That is what has helped marketplaces in India, to scale much faster in the last few years, as compared to the earlier part of last decade.”

Accel invests at the seed stage and prefers to take a long-term view of the sectors trying to assess potential sectors that can do well in the long-term. Talking about the impact of funding slowdown on early-stage startups, Daniel said, “Early stage tends to be more defined by how much capital companies are raising. Seed stage rounds in India continue to be in the $13 million range. It might have gone up slightly in 2021 but is now back to the regular range.”

While Daniel did not comment on how long the funding winter will continue, he said Accel has told founders to be careful with capital and make the dollar stretch. This has been Accel’s message to founders since last year and nothing has changed in 2023. “The general advice has been that companies should have the capital for the next 18 to 24 months. They should not assume easy fundraises, it is going to take time,” he added.  

In March 2022, Accel raised a $650 million, it’s seventh fund to invest in to India and South-East Asia start-ups. The firm has backed about 20 companies since then across sectors like Consumer Tech, B2B, FinTech, Digital Health and global software. .

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