1Mby1M Virtual Accelerator Investor Forum: With Sateesh Andra of Endiya Partners (Part 4)

Sramana Mitra: Do you want to talk about any other company?

Sateesh Andra: I’ll switch to an India team company. Abhishek managed the company. He had an exit in the first three years. It was a cyber security company that’s selling in Europe, US, and India.

But there’s this India-themed FinTech company called Kissht. They enable purchase financing for buying a mobile phone or a laptop. They can buy now and pay later.

The technology they have is determining the credit scores of consumers. In India, there’re no established credit databases. They look at different data sources like employment and salary information, bank savings, behavior, and credibility in the digital footprint.

They use all of that data to determine the creditworthiness. They also have collection automation. How do you collect the money on an ongoing basis? The third piece is the fraud database.

They even started a bit of personal loans. They acquire customers through multiple channels. We wrote the seed check. The company has raised close to $40 million. They have done really well.

Sramana Mitra: I actually have a question on companies that are raising a lot of follow-on capital. For a small fund like you, what is your take on companies that end up raising a lot of follow-on capital? Do you exit into follow-on rounds or do you stay put?

Sateesh Andra: We do not exit in any of these companies. We did a seed investment. We did pro rata in Series A and Series B. In terms of our fund two, the reason we increased the size is to be able to do many more pro rata around our portfolio companies.

It’s not our intention to stay in these companies forever. We understand that when large funding happens, you need to exit at the right time as a smaller fund.

Sramana Mitra: I think that’s true about what’s happening in the venture market in general. There has been a lot of infusion of capital in the pre-seed, seed, post-seed, and small Series A stages. It’s not the traditional $10 million Series A.

The bigger funds are doing these $5 million to $10 million Series A, but there are hundreds of funds that are now playing in your part of the ecosystem.

To counter the other side of the trend which is SoftBank and NEA putting huge amounts of money in later rounds, I think it’s better for smaller funds to take the money out at this point. Sometimes these very large rounds are going to be stuck there for a while and not get exits because they’re overvalued rounds.

Sateesh Andra: Let me clarify. I completely understand what you’re saying. Our seed rounds or pre-Series A rounds are less than $2 million. Series A are anywhere from $8 million to $10 million. Series B are $25 million to $30 million. Above that are Series C. I put in $2 million early on.

I own 10% to 15%. In a $10 million round, I need to put another million and a half to maintain the pro rata. In a Series B, I need to put in $2 million. You’re talking about $4 million per company to participate in every round.

You’re absolutely right. If you’re not participating in those rounds, you have to make a decision whether staying in makes sense or if it’s better for you to get out. Thanks to our entrepreneurs and our own due diligence, we’ve got great rights.

Sramana Mitra: Yes but as you go along, the exit question is going to come up. FinTech is going to be a lengthy journey. Quite possibly, you’d have to consider those possibilities. I think it’s okay.

The important thing is to make sure that each part of the ecosystem is healthy. If you look at the India early-stage ecosystem, the angels are getting nervous because exits are not happening.

A lot of angels had their money stuck for a long time. With all these developments and the understanding of the later rounds, the ecosystem is becoming healthier and that’s a very good trend.

Sateesh Andra: I completely agree with you. You need to monitor the situation and not get stuck and not exit too early.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Sateesh Andra of Endiya Partners
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