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February 16, 2010

Fund Manager Interview: Subrata Mitra of Accel Partners India

Extracts from the interview with Subrata Mitra, Partner at Accel Partners India that appeared in the GIVCA-Venture Intelligence India Venture Capital Report-2009 (that provides a synopsis of VC investments during the year). Subrata earlier co-founded early stage-focused VC firm Erasmic Venture Fund, which merged with Silicon Valley VC firm Accel Partners in mid-2008. Accel is among the handful of funds in India that are truly early-stage focused and was an active investor in 2009, especially in the Internet/Online Services sector.

Venture Intelligence: Has your team’s overall philosophy of investments changed since the merger of Erasmic with Accel? What are the other changes now that you are Accel India?

Subrata Mitra: Clearly, we’re managing a bigger fund now than at Erasmic. That does mean our investment range has moved to at least 3-4 times for the better companies. It has changed our thinking somewhat in terms of types and stages of deals we would like to do.

VI: What attracted you to your latest investments - enStage, Flipkart and CommonFloor? Are Online Services plays a particular favorite for your fund?

SM: We have been looking at Internet deals even as part of Erasmic. We believe that Internet is turning a corner in India now, and therefore different Internet related models would become increasingly viable in the coming years. Added to it is our local and global know-how on this area, which makes internet related investment quite lucrative for us.

VI: In general, what are the key qualities you look for in an Online Services investment?

SM: We look for the team foremost. We believe that there are only a few people available in the ecosystem today in India who can build great Internet companies. Once that’s given, we look for areas where rapid growth would be possible. Finally, we try to understand the quirks of running the model in India (as opposed to the US/Europe) which may require a different/alternative approach to market development/reach.

VI: What other sectors appeal the most to you?

SM: We continue to be intrigued with highly leveraged services opportunities (such as niche KPOs), Enterprise products (such as those delivered through a scalable SaaS platform) and other areas such as Healthcare, etc., which would become big in India, in our opinion.

VI: What sectors are you staying away from?

SM: Ones where larger sums of money would be needed for success (infrastructure, etc.)

VI: Would you invest in "two guys and a PowerPoint presentation"?

SM: Sure...we have done it in the past, even for one guy and a PowerPoint!

VI: All your other investments, except three, have been into Bangalore-based firms. Is this a conscious choice because you are seed level investors?

SM: We tend to be fairly hands-on with our companies, and it does help to therefore have them be located in the same city. Whenever we have deviated from this, we have usually done in a co-investment type of deal, where one of our partners would ideally be located closer to the company.

VI: What is your take on the recent developments in the Mobile Telecom industry? How do you think it affects startups in the Mobile VAS space?

SM: It’s probably EVEN harder for VAS companies to make money now in India than ever before. So, doesn’t look like things are getting better there anytime soon.

VI: What would you say is the most important quality for a start-up CEOs to have in today’s environment?

SM: Most startup CEOs need to understand their markets and fit their products/services into some market need that is clear and valuable. Also, it should be possible to argue that the identified need and can potentially become a big space under certain assumptions.