Fund focus: Endiya sees India’s early-stage upside

Endiya Partners is expecting a new wave of B2B company creation and investment in India’s early-stage start-up ecosystem on the back of encouraging themes around talent repatriation, a favorable policy environment, and increasing digitization in the business sector. However, the success of its second fund, which triples the size of its predecessor at $75 million, may owe more to signs of a boom at the larger end of the tech space. 

“Large corporates in the US and Europe have huge amounts of cash on their balance sheets, and in their quest to go global, they will definitely be looking for acquisitions. The unicorns and decacorns of the US and elsewhere will also look at acquisitions in countries like India. And in India itself, large corporates and unicorns are acquiring,” says Sateesh Andra, a managing partner at Endiya.

“This whole acquisition landscape is not just going to be secondaries anymore – we’re going to see multiple kinds of opportunities. When you see vibrant exits, that’s when LPs also get excited.”

Endiya has achieved at least three exits to date, with international strategic players prominent among the buyers. They include Little Eye Labs, a mobile app analysis start-up that became Facebook’s first acquisition in India in 2014.

This momentum helped Fund II quickly hit a first close of around $40 million in May 2019 and secure most of the rest of its target corpus before COVID-19 began gumming up due diligence. Nevertheless, pandemic-related delays to various formalities pushed the final close to 2021.

Most of the LPs in Fund I came back, including Small Industries Development Bank of India (SIDBI) and Life Insurance Corporation of India. They were joined by Nippon Life India Alternative Investments, the International Finance Corporation, and a mix of corporates and family offices, as well as ACE Fund, a government biotech vehicle.

Fund II will maintain a compact portfolio by seed standards, investing fewer than 20 companies and reserving $4-5 million per company for possible follow-on rounds.

The plan is taking shape as India’s early-stage VC space experiences a rapid proliferation in managers and new vehicles, thanks largely to increased appetite from India’s 263,000 high net worth individuals and aggressive ecosystem support policies from the likes of SIDBI. This has coincided with an uptick in entrepreneur-led fund launches and the increasing inclusion of India in the mandates of accelerators and seed investors around the broader region.

“There is tremendous competition. There are funds that can write a $1 million check and also write a $100 million check with an established brand,” Andra says. “The key then becomes, how do you find that right set of start-ups to invest and nurture into viable businesses? That’s why for us, defining what we won’t do is very important. We can’t be all things to all people. The sector focus, the stage focus, and how we are able to add value are extremely important.”

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• Topics
• South Asia
• Venture
• Technology
• India
• Endiya Partners
• TMT