Accel, known for its extensive investments in India’s e-commerce and marketplace sectors, is taking a unique approach by shifting its focus to smaller towns and villages in pursuit of potential unicorns.
The venture capital firm argues that these regions, referred to as “Bharat,” offer substantial untapped opportunities despite challenges faced by many startups in penetrating these markets.
“There’s a misconception that rural areas mean low spending power. However, the top 20% to 30% of consumers there spend significantly, estimated at over $250 billion,” explained Accel partner Anand Daniel in an interview with TechCrunch. This segment reportedly spends more monthly than half of the urban population.
Accel plans to prominently feature this new focus in its upcoming early-stage investment initiatives.
Accel’s pivot is noteworthy in a landscape where most investors prioritize startups catering to major urban centers. Having backed early successes like Flipkart, Myntra, Swiggy, and others, Accel holds stakes in around a fifth of all Indian unicorns, despite not deploying capital as aggressively as some peers.
Key to Accel’s strategy is the improving infrastructure in rural India, with widespread smartphone adoption and affordable internet enabling digital service uptake such as mobile payments via UPI. Enhanced warehousing and logistics further facilitate faster service in these regions.
Rural consumers are increasingly opting for higher-value purchases like 125cc bikes, larger refrigerators, and even pre-owned iPhones, indicating a growing market potential.
While many startups have struggled in smaller cities due to misaligned strategies or neglecting exurban areas, Accel believes there are ample opportunities for new entrants, citing the vast, non-zero-sum market dynamics.
Daniel emphasized the importance for entrepreneurs to understand local dynamics, including longstanding relationships between family-run businesses and local service providers. Accel’s portfolio example, Citymall, collaborates closely with micro-entrepreneurs in rural towns, ensuring mutual growth and engagement.
Accel acknowledges that startups targeting rural India will need tailored business models, customer acquisition strategies, and distribution networks distinct from urban counterparts. However, they are confident that successful unicorns will emerge from these regions, achieving valuations comparable to those in urban markets.
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