Ecosystem Ventures ESV Times Archives

ESV Times | Monthly Newsletter | September 2024

September 4, 2024

Angel Investor: To be or not to be?

Often, people have a lopsided notion about startup investing. Influenced by news reports, either they are too optimistic to generate 100x returns or too pessimistic that funding winter is wiping out the industry. Let me first share reasons not to invest in startups as an Angel Investor.

First, if your ‘only’ goal is to generate ‘super-normal’ financial returns, then capital markets might be a better alternative. There might be gems in small-cap / mid-cap that give equally good risk-adjusted returns.

Second, If you expect liquidity, then stay away from startups; investments in private companies are illiquid by design. Startup investors typically invest with a 3-5-year horizon, and if you try to sell earlier through secondaries, generally it would be at a significantly discounted price, rendering the whole purpose meaningless. Startup investments are for those with staying power.

Third, one should not be swayed by a couple of flamboyant stories, and jump into taking exposure in them. Irrespective of how attractive an investment may seem, it is always recommended to undertake a portfolio approach in startups – have enough capital to spread the risk across at least 5-7 startups.

Fourth, If you don’t have a solid connection into the startup world, and have access to a great deal pipeline, then generally you’re trying to select from a very small sub-set of the overall market. One has to have access to a larger funnel to (a) find the right gems, and (b) develop the right judgment about evaluating these startups.

Now, let me share the reasons to become an angel investor:

First, if you have a passion for building something of substance. Successful angel investors are super excited about the prospect of helping build something new, something big, something great. They want to be part of such stories where they feel like I’ve contributed to a story-in-making. Help founders, guide them, open doors for them, solve their problems, and be their sounding board. These are things one gets to do as an angel investor, but never as just an investor in public markets.

Second, a related benefit of the above is that once you start getting recognized as a valuable startup mentor/investor, you can also make this a professional career (part-time or full-time) as a business coach for startups, and charge for it separately.

Third, there is a constant desire to learn and become part of the future: remember, we’re talking about promising companies run by stellar founders using emerging technologies to craft the future. The learning from this journey is phenomenal.

Fourth, have access to a great pipeline of deals (if you are doing this full-time) or relationships with angel networks/funds through which you can invest and build a portfolio (if you’re doing this part-time). In this, make sure your deal pipeline is through actual ‘investors’ and not simply brokers/advisors/bankers.

So, if you’re sufficiently-informed about startup investing, and smart about it, you can have a great ride. Else, you may end up joining a large group of people who’ve burnt their hands.

Deal of the Month 01

AI Infrastructure for next gen Advertising

Hypergro.ai is an AI-led, video-first, and hyper-personalised, user-generated content (UGC) video ads creation and distribution platform to power performance marketing of brands. Their innovation drastically reduces CAC, skyrockets ROAS, and brings the power of personalized advertising to the forefront.

The numbers speak for themselves:

1282% ROAS improvement for a lab-grown diamond brand.
4X increase in organic trade volume for a leading trading platform.
90% reduction in CAC for a voice chat app.
$350k ARR in 12 months of launch
Poised to reshape the $650B+ digital advertising market
LTV to CAC > 10

Sounds Interesting?? Click the button below to connect with our investment team

Deal of the Month 02

India’s most valuable sportstech venture

Machaxi, is revolutionizing the sports tech industry with an asset-light, tech-driven model, reaching an ARR of
₹18 Cr. By leasing and upgrading private sports centers without CAPEX, Machaxi boosts revenues by 1.5 to 2x. Their area dominance strategy and high repeat rates—70% for Learn and 50% for Play—create significant market barriers. Partnering with Olympian Nisha Millet, they train over 2,000 kids monthly, setting new standards in sports training. Their app, integrating Learn, Play, and Shop, doubles center revenue within six months.

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Client Speak

ESV Times | Monthly Newsletter | August 2024

August 7, 2024

The entrepreneurial journey is filled with both excitement and challenges. At Ecosystem Ventures (ESV), we have consistently seen the importance of a strong support system for startups, especially in their early stages. As partners in your growth story, we understand that startups often face hurdles across various business functions—be it finance, marketing, technology, or strategic planning.

These challenges can significantly hinder the fundraising process. Early-stage startups often struggle to present themselves as investment-ready due to gaps in expertise and resources. Hiring experts for every function is neither practical nor feasible for most startups. However, accessing the right expertise can make all the difference in navigating these challenges.

At ESV, we bring a wealth of experience and expertise to the table, having evaluated over 3000 startups and successfully raised funds for numerous high-growth companies. Our deep understanding of the startup ecosystem, combined with our track record of nurturing businesses, makes us uniquely poised to be the first go-to partner for founders seeking comprehensive support. We offer not just advice but actionable solutions tailored to your specific needs.

That’s why we’re excited to introduce the Startup Growth Hub at ESV. This initiative is designed to offer expert guidance, mentorship, and hands-on support to startups, helping them overcome early-stage challenges and prepare for successful fundraising. Our goal is not just to assist in securing funds but to support the overall growth of your company, ensuring that you achieve your objectives and reach new heights.

We invite you to set up a conversation with Rahul Vaidya, our Chief Startup Evangelist, to learn more about how the Startup Growth Hub can be a valuable partner in your journey. Let’s work together to turn your vision into reality and build a thriving business.

Ecotone – Podcast of ESV

In this engaging conversation, Devashish takes us on his journey of creating GeoIQ, India’s pioneering location AI and intelligence platform. He and Harshit dive deep into the origins of the idea, the impact of COVID-19 and lockdowns, and the remarkable growth of the startup. Devashish also sheds light on their innovative business model, showcasing how they empower D2C companies to open offline stores using data-driven insights, including helping Lenskart launch over 1,000 stores. Additionally, Devashish shares valuable advice on selecting the right venture capital partners early in the business.

Watch the full video to uncover the secrets behind GeoIQ’s success and get inspired by Devashish’s entrepreneurial journey! Click now to explore!

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Startup 101 – Resources for founders & startup teams

Sales Tracker 101

In early-stage startups, founder-driven sales are crucial. The founder’s vision and product knowledge uniquely position them to convey value propositions, fostering trust and driving initial deals. Yet, many such startups falter in winning sales due to inadequate lead management and sales review processes. It is essential for founders to set the right processes and systems to train their next rung of sales champions.

Without systematic tracking, opportunities slip through the cracks, and strategic insights remain unexplored. To bridge this gap, teams should adopt robust tools for oversight.

Three things are essential for an efficient sales funnel. Lead management should capture all of the sales leads through multiple sources at one place. Second, all the captured leads should be clearly marked to an individual to set account ownership. Third, a reporting cadence to be adhered to diligently for performance review and planning.

Before the startup matures and invests in a full-stack CRM or other sales tool, download our comprehensive sales tracker template, to enable lead flow, account management, and performance reporting for your startup’s sales team. Transform sales into a structured, scalable engine for growth.

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Deal of the Month

India’s most valuable sportstech venture

Machaxi, founded in 2022, is rapidly transforming the sports tech industry with its asset-light, tech-driven business model, achieving an ARR of ₹18 Cr. The company leases private sports centers for five years without incurring any CAPEX, rebrands them and upgrades facilities to best-in-class sports infrastructure. Their area dominance strategy, acquiring 6 out of 8 sports centers in a locality, creates significant entry barriers for new competitors.

With a repeat rate of over 70% for the Learn vertical and over 50% for the Play vertical, Machaxi significantly boosts existing sports center revenues by 1.5 to 2x. Training over 2,000 kids monthly, they have established themselves as leaders in Bangalore sports circles. Partnered with Olympian Nisha Millet, they have set new standards in sports training and facilities.

Their innovative app integrates Learn, Play, and Shop services, doubling the revenue of sports centers within six months, achieving an average monthly revenues of ₹10.5 lakh. Each center coaches over ~160 kids and facilitates ~2000 adult playing hours per month.

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Net Present Value – Performance of ESV Portfolio Companies

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ESV Times | Monthly Newsletter | July 2024

July 3, 2024

In the world of finance, debt predates equity as a source of capital for a business venture. But startups are unable to access the traditional debt funding channels, as banks base their lending decisions on rigid criterion of revenue, credit scores, and time-in-business. Additionally, banks require assets to be used as collateral, which startups generally do not have.v

“Venture Debt funds” address this market-gap by providing short-term debt to startups. They act as specialized lenders who are willing to take on a higher level of risk in exchange for the potential of higher returns.

Typically, the underlying instrument in venture debt is a “non-convertible debenture” (NCDs). NCDs are coupon-bearing instruments issued by the startup to the debt fund. In addition to this coupon-bearing instrument, debt funds also subscribe to equity warrants of the startup, which gives them the right to subscribe to equity of the startup at a pre-determined price within a specific period.

For startup founders, debt funds provide time-critical cash without giving up too much ownership. They bridge the gap between funding rounds, extend their runaway, and sustain their growth momentum. Furthermore, debt funds offer founders more flexibility and convenience in deal structuring, in terms of repayment schedule, and exercise of warrants.

For Investors, it is a win-win, as they can enjoy a more predictable return on their investment through regular coupon payments and principal repayment, as well as participate in the equity upside through future funding rounds when the warrants are typically exercised.

Thus, due to lower cost of capital, faster disbursal, less dilution for founders on one side and predictable RoI, equity upside, CAT II fund tax benefits for investors on the other side, debt funds are becoming a popular option for raising capital in the Indian startup ecosystem.

But the key challenges to craft a win-for-all debt funding deal must not be overlooked. These challenges emerge as a lack of adequate data and information on the startup’s performance and creditworthiness, makes it difficult to assess the risk and return of the investment.

At Ecosystem Ventures, we prioritize architecting a deal structure which is fair to all stakeholders by leveraging our deep domain expertise, and extensive network, to source, evaluate, and architect the best investment deals for our investors and founders. This is coupled with end-to-end support and guidance to our partners throughout the debt funding process, ensuring transparency, efficiency, and alignment of interests.

Ecotone – Podcast of ESV

Beyond the Finish Line: Navigating the Post-Funding Success with Ravi & Nikhil

Founding a startup is a marathon, not a sprint. And fundraising? Just one crucial checkpoint. This episode features Nikhil Kaushik and Ravi Ajmera discussing the pitfalls that can derail founders after a funding round. Learn how to manage funds wisely, build strong governance, and maintain investor trust. Tune in to secure your post-funding success!

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Startup 101 – Resources for founders & startup teams

Work-logs: A Key to Employee Productivity

Early-stage startups tend to overlook the importance of work-logs as part of their personnel management. Work-logs are not just a way to track the hours and tasks of the employees, but also a tool to enhance their productivity, motivation, and accountability. By maintaining work-logs, employees can set clear goals, prioritize their work, monitor their progress, and identify any challenges or issues that need to be resolved. Work-logs also help managers to provide timely feedback, recognize achievements, and address any performance gaps.

Implementing a work-log system does not have to be complicated or costly. It can start with a simple Google sheet, where employees can enter their daily or weekly activities, hours, and outcomes. As the complexity and scale of the work increases, the company can leverage Google Apps Script to create a robust enterprise-wide work-log management system, that can automate the data collection, analysis, and reporting. Google Apps Script is a powerful scripting platform that can integrate with various Google services, such as Gmail, Calendar, Drive, and Sheets, and create custom applications and workflows.

At our company, we have automated such productivity enhancing best practices in-house. Here is a Google sheet template for you to download and use for your own work-log system. If you want to learn more about how we can help you create a custom work-log application using Google Apps Script, get in touch with us today.

Net Present Value – Performance of ESV Portfolio Companies

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Net Present Value – Performance of ESV Portfolio Companies

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ESV Times | Monthly Newsletter | June 2024

June 5, 2024

India’s economic engine is revving, and a new wave of opportunity is emerging: Small and Medium Enterprise (SME) IPOs. These aren’t just emerging startups; they’re established businesses with proven products, loyal customers, and a track record of revenue. For astute investors, this means the potential for significant returns – and the chance to be part of India’s next big success stories.

SME IPOs should be on your radar as they can offer portfolio diversification beyond large-cap stocks, potentially mitigating risk while capturing high-growth opportunities. They also give ground floor access as investing early in a company’s public journey can offer substantial long-term rewards if the company flourishes.

Startup founders have also realized the potential of the SME IPO route for their fundraising as it allows startups to broaden their investor pool and raise capital from the public markets. Trading on the stock exchange enhances a venture’s credibility and visibility, attracting more customers, partners, and potential investors. Moreover, going public provides liquidity options for shareholders, allowing early investors and venture capitalists to monetize their investments and exit the company by selling their shares.

While the potential is clear, investing in SME IPOs requires careful research and due diligence. One must watch out for:

Strong Fundamentals: Look for companies with a solid track record of revenue growth, sustainable profitability, and a clear path to future expansion.
Experienced Management: A competent and professional management team is crucial for navigating the challenges and opportunities of public markets.
Market Position: Assess the company’s competitive landscape. Does it have a unique product or service? A defensible market position? A loyal customer base?

SME IPOs are an evolving landscape, and it’s essential to have a trusted advisor who understands the nuances. We’re here to help you navigate this exciting market, identify promising opportunities, and align your investments with your financial goals.

Ecotone – Podcast of ESV

Decode Ecosystem Ventures’ Investment Philosophy with Abhishek & Nikhil

Don’t miss this candid conversation between Nikhil Kaushik and Abhishek Sanghvi, the driving force behind Ecosystem Ventures. Explore how ESV goes beyond traditional funding to forge true partnerships with startups, nurturing their growth and unlocking their full potential. Learn why ESV is considered the go-to resource for strategic advice and support, and delve into the success stories that showcase their transformative impact on the startup ecosystem.

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Startup 101 – Resources for founders & startup teams

Compliance 101

Internal compliance aligns company policies with laws and regulations, while external compliance ensures products and services meet legal standards. Startups, often lacking resources and expertise, due to inexperience or ignorance, are particularly vulnerable to compliance violations, which may lead to costly consequences in the future.

Compliance builds a good reputation and fosters trust with customers, investors, and stakeholders. Adhering to legal standards helps attract clients, secure funding, and establish partnerships. Clear compliance policies promote accountability and a trustworthy business environment.

Non-compliance causes operational disruptions and increased regulatory scrutiny, diverting resources and slowing growth. Regulatory violations result in fines and legal penalties, often creating a cash flow crunch for an early-stage startup. But beyond monetary impact, non-compliance erodes investor trust, making them hesitant to invest. It damages the company’s reputation, deterring investors and customers, and rebuilding trust is difficult. Ultimately, it lowers the startup’s valuation and affects future fundraising.

Deal of the Month

With a confirmed order book of ₹60Cr for FY25, QuantSolar is poised to close FY25 revenue in the range of ₹120-₹150Cr, significantly increasing its FY24 revenue of ₹34Cr. The company has secured 18 patents in specialized floating solar technology, further solidifying its leadership position in the market.

The company is currently operating with a manufacturing capacity of 100 MW. This capacity will be expanded to 200 MW in the coming months, and an additional 100 MW facility will be set up in Ujjain. This expansion is intended to meet the growing demand for their floating solar solutions from project proposals globally.

QuantSolar has successfully delivered India’s first Megawatt-scale Floating Solar Plant, boasting a capacity of 2 MW, along with one of the world’s largest Floating Solar Plants spanning 36 MW for NTPC. The company’s innovative approach addresses clean energy needs and champions water conservation, optimizing land use, enhancing power generation through water’s cooling effects, and fostering aquatic life.

The startup has strategically aligned itself with global leaders, joining the prestigious consortium led by DNV in the Netherlands. This strategic collaboration cements Quant Solar as a key player in shaping global standards for floating solar plants.

QuantSolar’s founders, Pankaj Kumar and Siddhant Agarwal, both IIT Kharagpur alumni, with over 20 years of global experience in marine engineering, salvage operations, and floating technologies, are well-equipped to capitalize on the vast untapped market opportunity of floating solar capacity addition in India and abroad.

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Net Present Value – Performance of ESV Portfolio Companies

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ESV Times | Monthly Newsletter | May 2024

May 8, 2024

We are pleased to share the first edition of our revamped Newsletter. New sections have been added to bring depth and nuance about the work we do, and why we do. I hope your readership and constructive engagement shall continue unabated. In this edition I would like to discuss potential in the alternate solar power generation space.

The most common ground mounted solar power plant typically requires 4.5 acres of land for 1MW of power. One of the major challenges in ground mounted solar plants has been the availability and acquisition of contiguous land which should be relatively non-undulating and without construction.

One of the recent innovations to circumvent non-availability of land is to create solar plants on water bodies, commonly referred as floating solar. As a unique feat of engineering, the solar panels are mounted on specially designed floaters which are anchored to the base of the water body.

The technology has potential to scale since there are over 22,000 lakes, 14 lac+ ponds, and over 2.9 lac+ reservoirs in India as per the water bodies census conducted by the Jal Shakti Ministry in 2023. Over 67,000 enumerated water bodies have a ‘water spread area’ of over 5 hectares. A 5 hectare area would translate to solar power generation capacity of ~3MW. Less than 1% of the available water bodies are being used in the generation of solar power. Hence, it is a white space open for innovative companies to conquer.

At Ecosytem Ventures, we are closely following the developments in the floating solar space. We believe in the transformational power of technology and human ingenuity to solve complex problems for the betterment of our collective future.

Ecotone – Podcast of ESV

Abhishek Sanghvi in conversation with Vaibhav Puranik

Vaibhav Puranik, IIM A grad with a unique experience of building 4 unicorns in his professional journey, engages in a fireside chat exploring fintech trends in the USA and India. Gain insights into key areas like payment technology, consumer credit, open banking, wealth management, and discover how collaborative ecosystems support startup successes.

Startup 101 – Resources for founders & startup teams

Project Management 101

Founder bandwidth is the most critical resource for an early-stage startup.

Founder bandwidth is more expensive or scarce than access to capital. It might sound counterintuitive but rigorous prioritization and management of founders’ time is essential to make or break the venture in the initial stages. Hence, project management processes are essential.

Project management best practices and weekly/monthly reviews should not be limited to large companies or organizations. An early-stage team can increase productivity by defining their project reporting cadence. There are many tools, basic to highly sophisticated ones, for project tracking and management. Before the revenue and team size expansion, warrants investing in a project management, it is advisable to use context-specific spreadsheets for keeping track of deliverables and tasks.

In this section, we want to share resources and insights which either expands the thinking of startups to make them future ready or help them to be more productive.

Deal of the Month

India’s most valuable cleantech venture

With FY24 revenue of ₹34Cr, confirmed order-book of ₹60 Cr to close FY25 revenue in the range of ₹120 – ₹150 Cr, proven track record of 15 successful projects amounting to 62 MW of power capacity addition, an IP repository of 18 secured patents in the specialized floating solar technology, Quant Solar is set to command leadership position to provide innovative solutions and solar capacity addition on water bodies in India and abroad.

The stellar founder team of Pankaj & Siddhant (IIT Kharagpur grads, with 20+ yrs. global experience in marine engineering, salvage ops, floating technologies) are creating a dent in the huge untapped market opportunity (280 GW just in India alone) of floating solar capacity addition.

Sounds Interesting?? Click the button below to connect with our investment team

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Net Present Value – Performance of ESV Portfolio Companies

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ESV Update 2023

January 31, 2024

By Abhishek Sanghvi | Reading Time – 9 mins

‘When the going gets tough, the tough gets going’.

This is what comes to mind when thinking about 2023. It was a year marked by a large number of shutdowns / markdowns in the startup world, and stories like Byju’s implosion took center-stage.

How about our ‘Ecosystem’ ? Here’s an update on what’s kept us busy during the year, how we’ve fared, and what’s our plan for 2024.

(Long Post)

Only when the tide recedes… {rest is obvious}

By God’s grace, we were adequately covered. Here’s how we fared during the year:

Made 3 new investments only: one in AI-based RPA SaaS venture, a second one in a D2C fashion-tech company; and the last in a social-impact ed-tech venture; other investments were extension of our investments in current portfolio companies
Made 1 partial-exit with a 2-4x return; declined 2 exit offers as companies were doing quite well.
Spent 3/4th of the time working closely with our portfolio companies
Continued to ensure that all – 100% of our startups stay afloat – zero write-offs have gone a long way in ensuring our high IRRs, currently at 60%+ at a portfolio-level

Some specific updates on our Portfolio, focused more on revenue growth / P&L than just valuations:

(All revenues are taken from quarter ending Dec ’23; comparison is from last year with some approximations)

A. Logistics-tech venture grew from ~15 Cr. ARR to ~28 Cr. ARR without any new capital raise and that too after completely eliminating non-tech (ops/services revenue). The largest Direct to Retail project in India – Samadhan by HUL – was completely designed, implemented and is running on this platform. The company’s solutions are deployed in more than 10 countries, and in the next 12 months should be able to touch 50 Cr. ARR.

B. B2B school focused ed-tech venture grew 2.5x in rev from 12 Cr. ARR in Dec ’22 to 30 Cr. ARR by Dec ’23 – quite a commendable achievement in an environment that’s been brutal for ed-tech. Currently working with 2500+ schools and seems to be on track to onboard a total of 4500 schools by the end of the ongoing sales cycle.

C. Our health-tech venture went through a hard-pivot to win some govt contracts; from doing <₹10 Cr ARR, they won a ₹75 Cr. order. We had invested at ₹50 & 100/sh 2-3 yrs back; we took a partial exit at ₹ 200/sh; they recently raised ~$1.5M at ₹ 500/Sh. They also became the first diagnostic company in India to get ICMR approval for multiple-testing using a single dry sample, and are now a vendor of choice for mass-scale testing at low price-points.

D. Another ed-tech company showed impressive growth, with a 4x surge in revenue from Mar 22 when we invested to an ARR of ₹26 Cr till Dec’23, though this included some hardware revenue. The company has been EBITDA positive and should be PBT positive by March; the overall progress without any capital infusion has been quite commendable.

E. Analytics-SaaS company with significant exposure to fin-tech went through a major revenue churn, and built new use-cases for retail, to hold their revenue steady at ~$1M ARR

F. Our fin-tech venture witnessed a remarkable 10x revenue increase from FY22 to FY23 , achieving an ARR of $12M till Dec’23. The company continues to scale business in FY 24 and is already the 3rd largest player in India in their domain. All this happened in spite of one of the company’s largest clients exiting business, impacting revenues for 6 months. A real example of an anti-fragile organization . The company is now launching its consumer product vertical, building on the success of business built and expanding its revenue opportunities.

G. An additional ed-tech and career counseling venture experienced a 40% revenue growth from FY22 to FY23, with an ARR of ₹10 Cr. till Dec ’23.

H. India’s popular healthy FMCG brand (including keto products) grew 40%+, reaching an ARR of ₹20 Cr. till Dec’23.

I. A fashion-tech innovator reconfigured its business model, reduced its dependency on online shopping portals by expanding offline, and held its revenue steady at ~Rs. 20 Cr.; with integration of AI in its design-stack, and a large retail expansion planned, it should double its revenue by next year. (No new fund-raise)

J. Next-gen executive education venture achieved a remarkable revenue growth from FY22 to FY23, with an ARR of ~₹40 Cr. till Dec ‘23 at positive EBITDA without any capital-raise

K. Logistics venture specializing in tracking goods-carriers at scale, expanded by 57% in revenue from FY22 to FY23, with current ARR of ₹20 Cr till Dec ‘23.

L. The OTT platform for local dialects achieved a 200% revenue growth from FY22 to FY23, with current ARR ₹42Cr. It was also featured in Shark Tank last year and raised capital at ₹300 Cr. valuation. They have launched ~60 new shows in the last 12 months.

M. The revenue of India’s leading society management platform grew by 25% from FY22 to FY23, reaching ARR of ₹12 Cr. as of Dec ’23; we had upped our bet on this venture, and our deal structure allowed us to capture an IRR of 35%+ so far based on follow-on round.

N. Our last story is about an ed-tech venture that had to completely reinvent itself; its primary rev model proved to be unprofitable in the short term (it will happen, but will require much more patience and capital support). So it pivoted to become an expert in hybrid tech-enabled delivery. The company sustained a very harsh business & funding situation, but was able to raise ₹6-8 Cr. in fresh capital, allowing it to turn profitable by Mar ‘24 at an ARR of ₹12 Cr. and clearer line-of-sight to ARR of ₹25 Cr. by FY ‘25.

Key learnings / what could we have done differently:

Have greater conviction, take larger bets; several times we perhaps became too conservative, and haven’t tapped the full upside potential of our investments
Our deal-sourcing has largely remained in-bound, and through founder & investor referrals; we recognized that we need to be ‘out in the market’ much more than we have

So what’s next for 2024?

1. We start by welcoming Nikhil Kaushik as an Advising Partner at Ecosystem Ventures. Nikhil, based in Delhi, comes with excellent pedigree (ISB, Citi PE) and entrepreneurial experience (recently exited his manufacturing venture). We’ve already made two investments together.

2. With 3+ years of continuous validation of our investment thesis, we intend to double-down on our low-risk startup investment thesis:

Invest in post-seed / post-PMF and pre-Series A, where we find the best risk-reward situation for ourselves
Build deeper relationships with VCs as more of our ventures are maturing and getting ready for their next rounds
Extend our ecosystem to a larger startup audience; go beyond the current word-of-mouth that brings us the best founders/opportunities.

3. Current pipeline looks quite strong. A few companies that we’re looking to invest in:

India’s category leader in a specialized sub-segment of solar industry; IIT-KGP grads with 10+ yrs of relevant experience; ₹30 Cr. rev for ‘24, order book of ₹60 Cr. & expected revenue of ₹120-150 Cr. for FY ‘25
Enterprise AI company with proprietary voice & language models built over 6 years; focused on BFSI with 2 paying customers & pipeline of 8 active conversations; ARR of ₹4-6 Cr; visibility of 3x for next year; IIM-C grads.
Enterprise SaaS product for compliance / GRC; founders with years of relevant experience; ARR of ₹4-6 Cr.; highly relevant product for global expansion
B2B ed-tech SaaS bootstrapped company with ₹16-20 Cr. ARR and exceptional engineering moat; BITS grads with 20+ yrs of exp across the globe.

4. Have more people join the ecosystem – either as investors, founders, mentors, partners or well-wishers. Send us a hi if you feel enthused by what we do.

5. Continue to enjoy our work as a team 😃

Featured pic: ESV team in our primary office. Missing in the pic are Abhijeet & Ravi from Mumbai, Vinay from A’bad & Nikhil from Delhi.

ESV Update 2022

January 31, 2023

2022 was a watershed year for most founders and VCs in India. The snowball originating from the ‘funding winter’ in the beginning of the year had engulfed the entire economy by the end of 2022, and continues to impact jobs and valuations into 2023. As we plan for the coming year, it’s apt to share an update on our journey, observations, performance and strategy going forward.

(Long Post)

Our Take on ‘Funding Winter’:

In Feb 2022, I was chatting with a colleague visiting from the US who started his career a decade before me. During the conversation I said something to the effect, ‘in this world of innovation and technology, talent is supreme, startups will rule the world, and capital is just another commodity for exceptional founders‘.

He immediately corrected me, mentioning that everything is true except for calling capital ‘just’ a commodity. It’s a phrase only used by those with limited experience who haven’t gone through down-cycles / recessions.

I thought about it a bit, and not only agreed, but also realized that our own success as investors had come from ‘conservative optimism’ : having a sharp focus on financial performance in addition to our quest to find category leaders in innovative domains.

So, a quick summary of where we stand today:

Made 18 investments in total, diversified across industries
Every single one of them – by God’s grace, has so far sustained the challenging times in 2022 and are as likely to succeed today as when we invested in them
Based on follow-on rounds, our returns are ~3.2x (multiple on invested capital)

How we spent the year:

Largely, in helping our portfolio companies. Also building a multi-country network for helping in international expansion.
Regrouping, strategizing and finding the right industries and types of founders to support in coming times
Innovating on new investment structures that can protect investor interests, while providing timely support to startups in a fair manner

Some of the notable news wrt our investments:

GeoIQ raised a $2M pre Series-A from Lenskart / Peeyush Bansal (Shark Tank fame, but not in the show 🙂
StackBOX raised a bridge round of $1.5M; deal included a Philippines based strategic investor
Stage raised a $5M round from Blume & others, and also moved the nation on Shark Tank Stage by their incredible story of perseverance
Saarthi raised $3.5M from GVFL & others; another great story coming from Tier-2 city like Ahmedabad
Lo! Foods raised $2M from a bunch of micro-VCs, one of the rarer investments to close in an incredibly difficult time around Diwali.

We’re also continuing with reinforced faith in our conservative principles that allowed us to minimize risks, that include:

Invest in mature and accomplished founders, typically with sufficient experience of ups and downs to able to handle tough situations and a learning & growth mindset.
Never invest in FOMO, no matter how hard the sales pitch. (We stayed away from B2C ed-tech in 2020-21 when it was all the rage. And from ventures where DD was impossible – later we saw a few get into trouble for financial irregularities)
Double-click on integrity of the founders and ‘informal’ market feedback.
Valuations justified by actual money hitting the bank (and a thorough analysis of revenue models and contract structures. E.g., is the entire revenue reflective of SaaS model?)

Let me also recap a few points that have helped us in the past:

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. Most partners work-at-cost and trade margins with equity.
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.
ESV has built a deep expertise in M&A and exits (investing is easy, exits define the quality of a fund manager).

For those who are involved or are keen about startups, we encourage them to jump in : whether as founder, investor or mentor – doesn’t matter. Ping us, and we’ll find a way to engage 🙂

Featured pic : ESV / iLEAD team after celebrating Sankranti in our office.

ESV Business Update

February 14, 2022

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:

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.
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!

Category: ESV Times

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By Abhishek Sanghvi | Reading Time – 9 mins