Global venture capital firm Accel Partners on Monday said it launched Accel Atoms — the VC firm’s pre-seed funding programme — where it will invest $250,000 in startups with an uncapped convertible.
Speaking on the development, Prayank Swaroop, Partner at Accel, said,
“Basically, we do not take any stake in the company in this round, but the startup gets the money now. And this $250,000 will convert into equity in the next round valuation of the startup.”
Accel Atoms is part of the sixth Accel fund, which is $550 million.
Through this programme, Accel Atoms will provide one-to-one mentoring, breaking away from the traditional one-to-many mentoring of regular startup programmes.
“We believe that finding five to 10 high-quality mentors, who at any point of time work with only one to two startups and spend two to three hours per month with the startup, is a far better model to get personalised attention for the startup,” Prayank said.
He added, “By joining Accel Atoms, the startup becomes part of the Accel family. They get all the power and access to what any other Accel portfolio gets — support of our investment teams, our venture development teams, access to 200+ founders of Accel portfolio, and access to 1000+ experts from our Accel network.”
Explaining funding through uncapped convertible, Prayank said, “When a startup raises capital, they raise through an equity investor, who gets a certain stake in the company.”
For example, if an investor takes a 10 percent stake in your company for $1 million, the company’s valuation is $10 million. On the other hand, convertibles are a way of investing in startups, where the valuation of the startup is decided at a future date.
This funding instrument helps very early or pre-seed startups since it’s difficult to agree on the right valuation of the startup at the time of investment.
“We can join any funding round of a startup. For example, if a startup is planning to raise $500,000 from angels, we can be part of that $500,000, or we are ok to add $250,000 to the $500,000 round and make it $750,000. We don’t change the terms of their $500,000 round. In fact, our investment will be $250,000,” Prayank explained.
Accel Atoms looks at early-stage registered startups. Even if the startup doesn’t have a product, customers, or revenue, it can still apply to Accel Atoms.
The fund aims to invest in D2C brands, fintech, consumer apps, B2B marketplaces, insurtech, crypto, blockchain, cybersecurity, SaaS, open-source, developer tools, healthtech, etc., startups.
“We are focused on creating the best possible choice for entrepreneurs. We are also very focused on not being yet another programme. We have thus, partnered with great operators and entrepreneurs in the ecosystem to give one-to-one attention to startups. I believe this is the biggest differentiator,” he added.
Accel Atoms has invested in a couple of startups, but it is hoping to get most of its admissions through the public launch. It is also aiming to invest in startups from India and Southeast Asia.
The team plans to run 100 days of mentoring programmes twice a year for operational simplicity. “So, if a startup applies before the launch of the mentoring programme, they can be part of that programme. Else, they will have to wait a couple of quarters to be part of the next mentoring programme,” said Prayank.