Accel plans partial exit from multiple early-stage investments

The transactions are expected to include a pre-initial public offering (IPO) secondary sale and an offer-for-sale (OFS) transaction in the upcoming initial public offering (IPO), three people familiar with the matter said. This further highlights that exit opportunities are becoming increasingly common for VC firms, even if they are delayed.

One of the people mentioned above said: “Accel has been in financing mode for the past few months and is actively looking for second opportunities, exiting some portfolio companies and returning capital to LPs (limited partners who invest in venture capital funds).” He Adding: “Accel has made long-term investments in these companies and they are looking to liquidate some of their holdings during the pre-IPO and IPO stages.” What is certain is that the ultimate goal of these companies is to conduct an IPO, although the timetable may There is a difference.

Accel will reduce its stake in online freight company BlackBuck, which is preparing for an IPO, according to a draft red herring prospectus the company filed in July. Online food delivery platform Swiggy is also expected to file a draft prospectus in the coming weeks, said the people, who asked not to be named. Accel is said to be one of the selling shareholders.

One of its other portfolio companies, BlueStone, closed a funding round this month valuing it at about $970 million, with Kalaari Capital selling nearly $1 billion worth of stock $3 billion rupees. Accel did not sell shares in this round but is expected to sell shares in the jewelry company’s upcoming initial public offering next year. Mint It was reported last week that Accel was one of the investors assessing profits ahead of the Urban Company’s IPO, which plans to go public in the next two years.

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BlueStone, Swiggy and Accel did not respond MintA request for comment was made last week.

Another person close to Accel said “most exits are likely to be IPO stake sales,” although the company may retain some opportunities even in the pre-IPO stage. The company is also looking for a “suitable exit”. “Exit,” the person added. “Their real goal is to look for exit opportunities pre-IPO or through public markets and other strategic outcomes.”

Overall, VCs have exited late-stage investments in the past few months, said Abhishek Bhagat, managing director and head of digital and technology investment banking at JM Financial.

“It amplifies the tighter monetization aspects of what most funds have been talking about. These are very coordinated efforts and well-structured processes to provide liquidity to portfolio companies that are performing well, so to speak. The company can continue to compound interest,” he said. Mint It was reported in August that Japanese investment firm SoftBank was able to generate liquidity through profits from investments in Firstcry and Ola Electric, which were listed earlier this year.

Demand for pre-IPO equity in established start-ups has been strong and rising due to healthy public market conditions. Bhagat added that funds have been nimble enough to capitalize on the momentum while they look to exit a majority stake through OFS during and after the IPO.

Investment over 10 years

Despite Accel’s efforts, many investments in its exit pipeline are still close to the 10-year mark or longer, which is not what investors want in an ideal scenario. Fund terms are typically eight years, and venture capital firms can seek two one-year extensions from fund investors. Likewise, a 10-year-old fund can seek two additional extensions of up to two years from fund investors.

According to data platform VCCEdge, Accel first invested in Urban Company in 2015. In 2011, its third fund (Accel Fund 3) invested in BlueStone for the first time, and the fund continued to make follow-up investments until 2020. Currently, Accel holds approximately 21% of Bluestone.

The firm first invested in Swiggy through its fourth fund in 2015 and later invested in its fifth fund. However, Accel booked a partial exit from the food delivery startup in 2018. According to VCCEdge, it currently owns about 12.5% ​​of the company. It first invested in Bookmyshow in 2012 and made subsequent investments in 2016.

India-based funds often face exit pressure to recycle capital for follow-on investments. However, the Indian arm of global franchises such as Accel are freed from such pressure and are able to invest for longer periods of time, if not exit, said a third startup VC.

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“Ideally, VCs should exit old investments before reaching the 10-year maturity as this is their obligation to investors. In India, they were not able to do this very often in the early years as only a few large strategic deals took place , such as Myntra’s sale to Flipkart and then Flipkart’s sale to Walmart, the current year has seen delayed exits – mostly through secondary equity sales or IPOs – over 10 years,” the person said, adding. , if the exit is more timely, the next year may be better.

Exited so far

To be clear, Accel’s best exit to date was in Flipkart, with the investment firm selling its remaining stake to parent company Walmart in 2023, and according to one report, Walmart’s total investment over the years was $60-80 million , achieved nearly 30 times return through news website Fund control. The exit comes shortly after Accel hired former UBS executive Alok Bathija as a partner in 2022 to lead the business, with the goal of driving the company out.

Accel’s Indian and US subsidiaries held a combined stake of more than 20% in Flipkart in 2008, but their stake in the e-commerce giant was reduced to about 6% before Walmart acquired a majority stake 10 years later. After the acquisition was completed, the investment company continued to hold a 1.1% stake and exited completely last year. Accel’s investment in Freshworks has also paid off handsomely, with Freshworks listing on Nasdaq in 2021. According to an April 2024 report, Accel received more than $500 million in investment from Freshworks alone. arca news website.

The early-stage investment firm has invested in startups such as Acko and Agrostar, and in 2022 it raised $650 million for its seventh fund, investing in e-commerce, software as a service (SaaS), consumer fintech and other sectors, global enterprises To Business (B2B) Marketplace, Digital Health and Web3. The venture capital firm aims to raise a new fund every three to four years and is currently preparing to launch its eighth fund focused on India and Southeast Asia. arc Last month it was reported that Accel was preparing to raise $700 million in its eighth India fund by the end of 2024.

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