ESV Business Update

On 12th Feb, Ecosystem Ventures was recognized by Govt of MP as the top startup investor from the region during an event attended by Union MoS for Finance Dr Karad, MP Shankar Lalwani, P Narhari (PS, GoMP), IIM-I Director Himanshu Rai and leading investors, fund managers from across India. Since consolidating all our strategy & investments activities into Ecosystem Ventures (ESV) in Jul 2020, we’ve been working 24x7x365 building the firm, with hardly any time to document the journey. This was a great milestone to put together an update on our journey so far.

Background / Recap:

The Partners at Ecosystem Ventures have all come from top-tier pedigree with 15+ yrs of exp each, and have played multiple leadership roles in their respective careers. After spending some time investing in startups, they arrived at two key learnings:

1. Capital has become a commodity, and is not the biggest problem for top quality founders to solve; even the best founders need a robust ecosystem to advise and support them in the tumultuous journey of scaling up.
2. Start-up is a game of speed and accuracy both (not unlike our CAT exam) – except that there is no defined curriculum, and we can never anticipate what new curve-balls may be thrown at us. When battling such uncertainties, we need extremely reliable and trusted teams (internally and externally) that understands the strategic roadmap, but can also get the job done. High-quality talent is at a premium. Such talent available immediately is at a super-premium. Talent available immediately with reliable outcome is priceless.

This thesis got validated while working with WhiteHat Jr (where one of the Partners was deeply involved from initial days through the $300M exit in 18 months). From 2020 onwards, ESV was setup by investing heavily in a robust strategy & investments team, and by working closely with a select set of high-quality founders & startups.

And the results have been phenomenal. Here is where we are now:

• As a team, Ecosystem Ventures has 6 Partners (all top-tier grads of our vintage); each one comes with a multi-dimensional experience of consulting/banking, corporate, entrepreneurship and investing. This 360ﹾ view-of-the-world has helped significantly.
• ESV has a full-time team of 18 across Delhi, Mumbai, Bangalore, Ahmedabad, Indore. This should double soon.
• About 300+ investors from around the world are co-investing with ESV through a pseudo-fund structure. This includes corporate leaders, bankers and family offices. 
• We have invested ~Rs. 35 Cr. across 11 ventures. 4 are recent. Remaining 7: each has raised follow-on rounds; Annualized MOIC (Multiple on Invested Capital): Median: 3.5x | Wtd. Avg: 4.5x. This should be amongst the best in India. [Of course, the true test would be at the time of Exits]
• It’s also heartening for us that every startup is growing, despite a lot of challenges & unforeseen circumstances, and we have so far not let a single startup fail – even if it required deploying our team at our cost to help out. Almost like extended co-founders.
• We’ve built a phenomenal ‘ecosystem’ of advisors, partners and reliable service providers across technology, digital marketing, international expansion, HR recruiting, finance and executive search.
• ESV has also architected an excellent model of risk-and-reward sharing so there is value-generation for all participants of the ‘ecosystem’. Most extended partners work-at-cost and trade margins with equity. This provides immediate reliable support, minimizes cash outgo, and aligns everyone’s incentives towards success of the startup. Going even further – it creates a greater sense of ownership in a wider circle, which has a massive intangible impact
• As fund managers, we invest a substantial quantum ourselves in every investment (~10-20%); it’s a significant skin-in-the-game; there’s also zero asset mgt fee for investors; only carried interest (sharing from returns generated, with a high hurdle rate).
• Less is better. We’re staying low on deal-count, but heavy on analysis, deal structuring and risk-mitigation. The last investment took 3 months to finalize, 24 hrs to close.
• ESV is building deep expertise in M&A and exits (investing is easy, exits define the quality of fund manager). We’ve already concluded 2 M&As for our cos.
• Word about our ‘deep engagement’ model has gone around the circuit. A few VCs are now bringing us onboard for strategic advisory + management oversight to unlock full potential of their portfolio companies. 
• We’ve also setup an investment banking practice raising $3M-$20M for startups. Have closed one deal; three are in process.
• This year we’re organizing our investment activities through a SEBI-registered Angel fund

In startup lingo, we’ve found a unique product-market fitment, and should scale quickly from here.  

For those who are involved or are keen about getting involved in startups, we encourage them to jump in : whether as founder, investor or mentor – doesn’t matter. The learnings are deeply satisfying and worth millions in intangibles. Tangible IRRs flow naturally. Ping any of us to invest, refer startups to us, act as advisor/mentor, spread the word!