Accel rejigs India playbook, bets on IP-led manufacturing after previous misses
'I don't think climate tech has close to lived up to its potential, at least in India, and I think it's the same for some other nations globally," Prashanth Prakash, partner at Accel told Mint in an interview.
In the agritech space, Accel's investment in AgroStar is among a few that's expected to pay off. The VC firm led a $6.7 million fundraising round in April for the Pune-based startup that offers seeds and farming advice to farmers.
As for the consumption sector, Prakash said Accel continues to be positive, although he added that both VCs and startups have to find 'new paradigms" rather than building another Swiggy or Flipkart.
'I don't think you can do more of the same. We believe that the current platforms are very powerful but it's about finding new pockets of consumption beyond the top 100 cities," said Prakash. 'We're trying to double down but it's still early days."
Accel's investments in India's consumption sector include Bengaluru-based grocery chain Apna Mart, starting with a $10-million Series A investment in 2023, and e-commerce platform CityMall, where the VC firm led a $11 million Series A round in 2021.
While climate tech and agritech might not have played out as well as Accel had hoped for, the investment firm expects Indian startups will have a role to play in the global energy transition space.
'I think it's coming down to hardware and components. For example, how do you create rare earth-free motors," said Prakash.
Accel has made investments in what it calls electric vehicle components but those remain unannounced. It's these kinds of spaces, where creating intellectual property (IP) is crucial, that Accel believes the country will be able to shine.
Advanced manufacturing as India's moat
Accel's increased focus on manufacturing in India comes at a time when geopolitical upheavals are causing companies across the world to look outside of China for their requirements. India is attempting to position itself as the most viable option.
What Accel calls advanced manufacturing is essentially where startups build capabilities from an IP and engineering-fist standpoint. 'Startups in this space leverage innovation across a few dimensions, not all of them in every case, but it could be more than one," Prakash said.
The three innovation archetypes that Accel segregates startups into are product-led, process-led, and equipment-led.
Examples of startups of each archetype include gas turbine company Nabhdrishti Aerospace, speciality chemical manufacturer Scimplify, and carbon fiber and composite manufacturer Fabheads, respectively.
Accel sees innovations from each of these archetypes cropping up in sectors like aerospace and defence, electronic components, medical devices, space, automobiles, chemicals, and EV-based components.
India produces about 1.5 million engineers every year, but only about 10% of them find employment, according to a TeamLease report. But with manufacturing picking up, Accel believes these engineers can find employment in the sector.
'India's talent engineering talent pool was always repurposed. It was always directed towards coding. It was an utter waste of engineering talent," said Prakash.
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