Accel Partners is a venture capital and growth equity firm that manages over $8 billion. Accel has a 30 year history in investing in Silicon Valley. They back some of the most prominent global firms such as Facebook, DropBox, Slack, Etsy, Spotify, Atlassian, Squarespace, Braintree, Cloudera, Kayak, 99 Designs and many more.
The offices of Accel in Palo Alto are minimalist and quite beautiful. We had discussions around a large boardroom table. Before starting, they asked each of us our most used phone application. It was small signals such as this that demonstrated their continual effort to stay current in the technology space.The company follows a philosophy of “Chance favors the prepared mind”. This roughly translates to mean that sudden flashes of insight don’t just happen, but they are the result of preparation. Accel embodies this philosophy in the way they conduct their research on potential investments. They make sure they understand the market, the people and current trends before considering an investment.
“Trends come and go, people don’t”. Accel partners value people far above ideas. This is because the commercialisation of ideas is where the value hides. Successful entrepreneurs are described by Accel to have a sense of humility and desire to learn and they are willing to change and adapt with the fast paced environment. One example of Accel investing in people is Stewart Butterfield, a co-founder of Slack. He initially started work on a gaming platform when first looking for investment. Accel invested in him not because they believed in his game but because they believed in him, his skills and his passion. I don’t think they quite anticipated a platform such as Slack to emerge!
There are four areas Accel has made concerted efforts to focus on; Payments, API Economy, SMB Operating Systems (e.g. Squarespace, Xero), Marketplaces (e.g. Lynda). These have resulted in a handful of investments that hopefully work well in a market perspective and product perspective. “Being first is important to us”. Backing a firm that has already received a round of funding is obviously undesirable, though they have backed companies in this way which have turned out successful.
Accel offers ‘smart money’, in that it offers money as well as value-add. Naturally, partnering with any VC with a standing such as Accel will help build the business brand and get the word out. A large part of Accel’s value comes from their community and their ability to grow businesses Internationally. Partnering with a large VC has many benefits beyond raising capital. It allows businesses to have a reliance on the network of the VC. It also makes it easier to hire if you are Accel (or similar) backed as people will view the work opportunity as more long term and secure with money to follow.
Accel works with companies from all over the world and seemed very strongly of the opinion that ‘You don’t need to be in Silicon Valley to build a great company’. In fact, some of the best businesses in the world are not located in SF. This is probably because they have to figure out how to survive without making use of the capital and networks available in SF.
Accel noted that the number of conversations with Australian businesses has increased 10 fold in the last year and a half. They certainly don’t encourage companies to move here. However there seems to be a notion that global companies should have a presence here to be successful in the long run.
So what makes a business a winner over a loser? Well, from an investment perspective, the business needs to address an actual problem or pain-point. Further, the business should bring something new to the table (e.g. be a Kayak, AirBnB or Uber) and not simply try to copy an existing model, only tweaking it slightly (it is likely slight tweaks won’t lead to desirable +10x growth). Finally, some of the best businesses have an addictive product with quality features.
If you’ve come here for advice, acquiring funding should not be a goal. Rather, create a good product and make something that people want. If you do this, you won’t need to worry about funding (i.e. the funds will come to you)!
By: Chris Rieger & Jaco Du Plessis