Accel, the 39-year-old venture firm, just pulled a major power move. It announced, via a simple blog post, that it has just closed a new, global, late-stage fund with $4 billion in capital commitments.
The fund, which closed last week, would be notable in any market. It’s a lot of money. But at a moment when two of Accel’s fiercest rivals — SoftBank and Tiger Global Management — are seemingly low on capital relative to recent years, it must be a particularly sweet moment for the firm, which now employs around 100 investors (and 200 employees altogether) across offices in San Francisco, Palo Alto, London and Bangalore.
Indeed, assuming the market is undergoing a reset and not a major, years-long correction, Accel’s timing could hardly be better. The only question is whether it should have scaled back its ambitions as market conditions shifted this spring. (We reached out to Accel earlier today for comment but a spokesperson pointed us back to the firm’s blog post.)
It wouldn’t be the first time that Accel has given money back to its investors amid market turbulence. In 2001, Accel raised what was then its biggest fund ever — a $1.4 billion vehicle — only to reduce the fund size to $950 million in 2002 after the tech market — which first soured in the spring of 2000 — failed to bounce back and frustrated limited partners, or LPs, proceeded to make a stink.
LPs seem highly unlikely to push back this time around considering what happened next. Before cutting back that $1.4 billion fund, Accel proposed splitting it into two $700 million funds: One to invest as planned and a second, $700 million fund to begin investing in 2004. The LPs who voted against that idea — and the majority of them did — are probably still kicking themselves.
One of them is Chris Douvos, an investor for Princeton’s endowment fund at the time. After the kerfuffle over the 2001 fund, he passed on Accel’s next fund, out of which Accel led Facebook’s $12.7 million Series A round in 2004. It became one of the best-performing venture funds of all time (ouch). Meanwhile, Douvos lost his access to Accel. (“Let’s just say I’m not on their speed dial,” he joked to this reporter in 2016.)
All that said, it’s hard not to wonder how much better Accel’s returns might be if it raised at least a little less, particularly given that it has very aggressively fundraising in recent years.
Just last year, it rolled out $3 billion in funds across a $650 million early-stage U.S. fund (its 15th), a seventh early-stage European and Israeli fund that also closed with $650 million, and a $1.75 billion global “growth-stage” fund designed to back companies like Qualtrics and 1Password, where a mature company has been bootstrapped previously and Accel helps turn its dials with a massive capital infusion. (In contrast, Accel’s new $4 billion global “late-stage” fund aims to invest money into companies that have closed previous venture rounds.)
These are enormous venture funds by historical standards, and they are getting deployed fast. (Accel closed its previous global late-stage fund with $2.3 billion just one-and-a-half years ago, in December 2020.)
In fairness, Accel has seen some massive returns. It owned 24% of Slack at the time of its direct listing in 2019 and reportedly returned $4.6 billion to its limited partners on that bet alone. Accel also owned 20% of Crowdstrike when the company staged a traditional IPO in 2019, and even with tech shares tanking, Crowdstrike’s market cap is currently $38 billion. Put another way, it’s easy to appreciate why Accel’s investors signed up for this newest fund, even as their overall assets may have been hit hard by broader market conditions.
As for whether or not Accel has begun to overdo it — the bigger the funds, the harder it is to produce outsize returns — only time will tell.
In the interim, the firm has grown noticeably more integrated in recent years, and it seems to be benefiting from the strategy. To wit, while Accel’s London team (established in 2000), and India team (2008) are responsible for raising their own early-stage funds (the India team announced a $650 million seventh fund in March), Accel’s global late-stage funds are community property. That means that each team can tap the firm’s newest fund to make late-stage investments; they will also be responsible for generating its returns.
In a world where giant companies are now springing up everywhere, it makes a lot of sense. For example, when India’s Flipkart sold for $16 billion to Walmart in 2018, the profits from that sale benefited not just Accel’s LPs but everyone who works for Accel, too.
The same was true when the software company UiPath went public last year. Discovered by Accel London’s team — and specifically, a partner who has since been poached by Sequoia — UiPath’s success has since enriched the entire partnership.