HYDERABAD: In the midst of a buoyant start-up ecosystem, Hyderabad-based VC firm Endiya Parnters nurtures entrepreneurs who are constantly pushing the limits in breakout sectors. Founding Partner and MD Sateesh Andra loves gritty entrepreneurs who have intense clarity. A leader who helps evolve ideas into real businesses, Sateesh emphasises that it is important for entrepreneurs to focus on the journey as much as the destination.
When Sateesh Andra strides into the Glass Onion restaurant at Boulder Hills, Gachibowli, dressed in jeans and a white shirt, he gives out the relaxed vibe of a football quarterback who’s just won the big game for his team and has come to unwind. In fact, sports is a subject dear to the heart of the Founding Partner and MD of Endiya Partners which is one of the most successful venture capital firms in India. He draws several parallels between his entrepreneurial/investor career and that of an athlete’s.
“Startups are not just 100-metre sprints but are like marathons,” he says, advising young startup founders to grasp the larger picture rather than zoom forth on a fund-raising spree. Dipping a roti into a fragrant bowl of piping hot methi chaman, Sateesh’s Silicon Valley drawl appears more pronounced as he digs in, enjoying the ambience and the food. Articulate, observant and completely in sync with the moment, he wears the venture capitalist mantle lightly as he talks about Endiya’s journey.
It’s been seven years since you started Endiya Partners with Dr Ramesh Byrapaneni and it’s been a robust journey so far for your firm. How did a seasoned venture capitalist, who lived and worked for 18 years in Silicon Valley, San Francisco, pick a cardiologist as a partner to start this venture?
I used to travel between India and US for entrepreneurship conferences at ISB in 2015-2016 which is where I met Dr Ramesh. At the time, venture capitalists were focusing on product companies which would cater to not just India, but the globe.
Healthcare was an area of interest, though my expertise lay in technology and financial services. I enjoyed Dr Ramesh’s perspectives, his energy and vision. He was surprised when I broached the idea of him as my partner. I told him, I could teach him all about finance, but domain is something one would need to know and he was a highly accomplished cardiologist. I think I am lucky he agreed to be a part of Endiya. Like in tennis doubles, it is not often the two best singles players who win, but two players know each other well and anticipate each other’s moves. That’s how we are.
‘We walk in early when the risk is the highest’ is Endiya’s tagline. How high is the risk factor in early-stage venture capital companies?
There are two approaches to investing. One style is to invest in a lot of companies, say 50-60, which look at high-level, interesting problems and have good teams. Then wait for two-three years and invest more in companies that are doing well. The other style of investing is fairly concentrated portfolio bets. We end up going for not more than 20-25 investments per fund and carefully nurture them. Again, when we pick startups, we are often the ones writing the first cheque. In some cases, people may not even have quit their jobs or they have very few paying customers.
There are three kinds of risks: market, product and team risk. When we go in, all these risks are at the highest level. As investors, we cannot be all things to all people. We need to be domain-focused, know the trends, assess the company which is at a very formative stage. If things go well, we benefit because we have entered at a low valuation. If they don’t do well, obviously we lose money. But if they succeed, we get paid more handsomely than those who follow us.
What kind of startup portfolios does the Endiya Partners basket hold? What is it that piques your interest?
At Endiya, we partner with businesses very early in their journey and hence the risk is significantly higher. Broadly, good business ideas that have distinct product flavours and intellectual property pique our interest.
For us to sit up and take notice, there has to be a fair amount of technology, intellectual property and noticeable barriers of entry. We invest in technology (SaaS, DeepTech), digital health and lifesciences and financial services. We don’t do plain vanilla services like say an NBFC lending money or a brick-and-mortar hospital. It has to be globally relevant and non-linear in scale. Our portfolio companies are across India, SE Asia and the US.
‘Unicorns are great, but tread with caution’
It is said that knowing when to exit is the key to being a good venture capitalist. So, how much of hand-holding do you do for these startups that you pick and when do you know that is the right time to exit?
The decision is made by the entrepreneur, not so much by the investor. A lot of times, entrepreneurs make the decision when to raise more capital, when to exit. Or if it’s not working, when to shut down and move on with their lives.
We guide them and coach them. If a company has raised say $10 million and earns $20 million in revenue, they can earn maybe half a billion dollars in exit. But if the entrepreneur wants to raise more capital, we tell them the cost of that decision. Their stake gets diluted and there are fewer companies which buy $1 billion companies, so there’s a risk. They own more if they raise less amount of capital. But the call is finally the entrepreneur’s. For ourselves, we can exit at will, they cannot hold us back.
You grew up in Anantapur and then you went on to pursue the Great American dream. You studied in the US, worked and lived there. What were those heady days like?
I kind of believe that opportunities were presented to me. I can claim that I am super intelligent and planned my life, but that would be a lie. Till 12th grade, all I did was play a lot of table tennis. I went to JNTU to pursue engineering, where I was passionate about computers and micro-processors. I chose to go abroad (US) for a Masters, like many others, and moved to Silicon Valley for work, which is till date the Mecca of technology. I spent the first eight years working and then the startup bug bit me.
Creators like Steve Jobs, John Chambers and James Clark used to be very accessible, be it at parties or conferences. Out there, I founded my own startup named Euclid after the famous mathematician, where I learnt the dos and more importantly the don’ts. I made a lot of mistakes as well, but I enjoyed the journey. I figured out that this whole startup space is about creation and making the world a better place to live in. It is also about working with brilliant minds who want to attack the traditional form of thinking.
How often do you say no to startup enthusiasts? Do you sift through every proposal? Most of Endiya’s picks appear to be winners?
I think we get about six-eight plans a day, which is roughly about 2,500 plans a year. At least 2,000 we can discard without wasting too much time because a lot of them are me-toos. They say 10-min grocery or cab service or better than Swiggy etc. Good ones may be around 400-500, a 100 amount to good conversations, 50-odd are deeper conversations, 25-odd are diligence. We finally end up making eight-10 investments a year.
You’ve often said that the journey is more important than the destination. As a VC, is it that easy to be detached from the outcome?
Many of our decisions are made in the first meeting. For example, in the case of Qapita, which specialises in digital equity management, CEO Ravi Ravulaparthi wanted me to be a customer. But I really liked the concept and in the second meeting, I told him Endiya would invest. These decisions are made somewhere between the gut and the heart because there isn’t enough data available.
We assess whether the team has clarity, is open to feedback, if we can add value and then take the leap of faith. Everyone talks about winners, but a fair share of our investments don’t do well. The reason why I emphasise the journey is because, well, all of us want to get to the great destination. But if you don’t enjoy what you do every day, you’ll not get there. Startups are about combining both sprints and marathons over a course of say 10 years.
How many portfolios do you handle personally?
Partners at Endiya do not handle more than eight-10 investments at a time because it is like helping a young child grow and any more would become difficult.
You have been closely associated with badminton great P Gopichand. You were involved in his academy and your friendship goes beyond mere business. Tell us about your equation with him.
Gopi’s a friend, guru, companion, advisor. I feel he’s a great human being not just because he’s successful, a champion and has trained so many great players. He’s genuinely passionate about what he does. I am just a volunteer in what he’s doing, giving him some inputs on how to scale. Sportspersons are actually very similar to entrepreneurs. A sportsperson takes risks. When they lose, they can reflect and feel sad, but they need to be ready for the next game. The ability to take risks, quick decisions, sizing up the competition are also qualities that an entrepreneur needs to have.
While you work out every day to stay fit, you are also a firm believer in the power of meditation. Tell us about this journey.
Earlier on, I was a very difficult entrepreneur to work with and felt I was invincible. What I did not realise was the power of reflection, meditation and the ability to be aware of what’s happening. I would be lying if I would say that I am always calm. The only difference is that I am aware if I am upset.
The minute you become aware, instead of reaction, there is action. It is like you live happily every day, and you die every day. Most of the time, we either regret the past or are anxious about the future. It is about realising the power of now and to be detached. It’s not that I don’t want a good outcome when working towards a goal, but the trick is not to get engulfed in the feverishness of it.
You have some unicorns (a privately-owned startup with a valuation exceeding $1 billion) in your portfolio. However, you also say that there is a lot of noise around unicorns these days and it is not quite what it’s being made out to be. What exactly is your opinion?
Yes, we (Endiya) are also beneficiaries of this whole unicorn trend. But I strongly believe that there is a lot of froth in the market. Unit economics has to work, i.e cost of building a product or service vis a vis what a customer is willing to pay. Unless these things come together, you cannot build a company that can sustain long-term. There are a lot of businesses that haven’t discovered the fundamentals yet.
So, we caution entrepreneurs in the ecosystem not to pay too much attention to the valuation tag. Focus on value creation. If you do really well, automatically you will get the millions. But be capital-efficient, look at the revenue, figure out the margins and build a viable business.