Beyond Unicorns: E2E Networks and Alternative Paths to Stakeholder Value Creation

In India’s startup ecosystem, the path to success is often portrayed as a journey with just one end goal: achieving unicorn status and then maybe pursuing a multi-billion dollar IPO. 

This narrative, fueled by the allure of billion-dollar valuations and easy availability of venture capital, became deeply ingrained not just in the minds of the general public but also many founders. But is this the only route to success? 

While the unicorn path undoubtedly led (and will lead) numerous companies to success, it’s worth understanding that there are other viable routes to creating substantial value for all stakeholders – founders, early investors, employees, and public shareholders alike.

To hark back to the (sort of) recent past, before the 2000s, going public was the primary path for companies to raise capital. Giants like Infosys, TCS, Marico, and HDFC, among others, built their massive empires in the full scrutiny of the public markets. However, the rise of venture capital and private equity in India changed this dynamic, allowing companies to stay private longer and pursue higher valuations.

However, not all businesses catch the fancy of investors for numerous valid reasons. But that doesn’t mean the end of the road or stunted growth.

Here, I examine one of the alternative paths through the journey of AI cloud service provider E2E Networks, a Blume Fund I company. By going public early, at a lower valuation, E2E Networks is a case study of a highly viable alternative approach to stakeholder wealth creation. I am not prescribing which route is better — it’s about the diversity of paths to success.

Examining this alternative path encourages a more nuanced discussion about startup growth strategies and value creation models. After all, in a diverse ecosystem like India, shouldn’t we expect and celebrate multiple routes to success?

The E2E Networks Journey

Founded in 2009 by Tarun Dua, E2E Networks began as a cloud infrastructure company providing affordable solutions to startups and SMEs in India. Its unique selling proposition? ​“80% of the functionality at 40% of the cost” compared to giants like Amazon AWS or Microsoft Azure.

Key Milestones:

1. 2009 – 2014: Raised approximately INR 3 crores (less than USD500K) in private funding through three rounds, the highest pre-money valuation being INR ~11.25. crores 
2. 2018: Listed on NSE Emerge and raised primary capital of INR ~15.67 crores and OFS of INR~6.32 crore with an IPO post-money valuation of around INR 80 crores
3. 2020: Market cap dropped to INR 19.58 crore during the pandemic.
4. 2020 – 2024: Remarkable recovery and growth
   • FY23: Market cap grew to INR 255.85 crore
   • FY24: Surged to INR 1,323.61 crore
   • September 2024: Reached ~INR 5,000 crore (~USD 600 mn), making it one of 2024’s best-performing IT stocks based on Bloomberg data.

The Unconventional Path to Stakeholder Wealth

While many startups chase multiple funding rounds, often late in their journeys, potentially diluting stakeholder value, E2E Networks took a different approach:

1. Limited Private Funding: Raised less than INR 3 crores before going public, preserving early stakeholder equity.
2. Early IPO: Listed on NSE Emerge in 2018, opening opportunities for public investors.
3. Majority Promoter Equity Structure: Maintained a significant promoter stake (55%+) while allowing for public investment.
4. Focus on Profitability: Became PBT positive early on, benefiting all stakeholders. Frugality and perseverance are a part of the company’s DNA. 

The Results: Stakeholder Wealth Creation

E2E’s strategy has led to remarkable wealth creation for various stakeholders:

• Founders and Promoters:
  • September 4, 2024: 59.64% stake Estimated value of ~INR 2,154 crore
• Early Investors (Blume Ventures):
  • Initial investment: INR 1.7 crore total private funding
  • Returns: 20X, Blume Ventures sold its stake in 2023 (We initially sold as part of OFS and then later had to sell when the market cap was between INR 200 – 300 crore (USD 25 – 40 million) because of the regulatory need to wind down the fund. Massive power law would have played out if we could have held it longer.)
• Employees:
  • Immense value creation for employees through their ESOPs
• Public Shareholders:
  • IPO price: INR 57 per share
  • September 26, 2024 price: INR 3,383 per share

The readers would probably debate whether the current multiples are here to stay or go; hence, the above numbers can change. However, the broader point I am trying to make is that even if the company were valued at half its current valuation, it would still be a case study for value creation with the least possible fundraising and founder dilution.

Unicorn Route vs. E2E’s Path: A Detailed Comparison

Typical (Hypothetical) Unicorn Journey:

• Companies often undergo several funding rounds (4+) before reaching unicorn status. While these rounds provide essential growth capital, they also result in equity dilution.
• Founder ownership tends to decrease as the company grows, sometimes falling below 25% at unicorn status. This effect is more pronounced with multiple co-founders.
• Early-stage investment opportunities are generally limited to venture capital and angel investors. Public investors typically gain access in later stages, such as pre-IPO placements or public offerings.

E2E’s Approach:

• Limited private funding: Less than INR 3 crore (USD 500K) raised
• Early public listing: IPO in 2018, just nine years after founding
• Capital Efficiency: Built INR 96.10 crore of revenue with total raise in private (INR 4.07 crore)+ IPO (Fresh Issue and OFS) INR 22 crore. The recent preferential Allotment of INR 405 crores will help the company grow further.
• Balanced ownership: 50%+ promoter stake in FY24, with ample public float 
• Consistent value creation for all stakeholder groups

Also to be fair, E2E’s success isn’t just about funding strategy; it’s also about adaptability and capital-efficient innovation. 

1. Initial Focus: Affordable cloud infrastructure for SMBs
2. Expansion: Introduced hourly-billed SSD public and private clouds
3. Diversification: Developed a cloud-agnostic Cloud Operations Management platform
4. AI/ML Push:
   • 2018: Entered the Indian Cloud GPU market
   • 2023: Launched an AI/ML platform with next-gen cloud GPUs
5. Current Position: Leading Infrastructure-as-a-Service (IaaS) provider in India with a strong emphasis on advanced Cloud GPU capabilities

While being frugal on spending, this intelligent and calculated evolution allowed E2E to tap into high-growth markets, driving valuation and wealth creation for all stakeholders.

E2E Networks’ journey is not an isolated case. Other tech companies have successfully gone public on SME Exchanges/​Mainboards at lower valuations and created substantial stakeholder value without taking the ​‘unicorn’ route. Infollion, Tracxn, Zaggle, Rategain, and ixigo are some examples here.

Conclusion

E2E Networks’ journey demonstrates that companies can create substantial wealth for all stakeholders without following the typical unicorn playbook. 

By maintaining a balanced ownership structure, focusing on profitability, and choosing an unconventional funding path, E2E has built a company valued at ~INR 5,000 crore (USD 600mn) while creating value for founders, early investors, employees, and public shareholders. 

This case study offers a powerful lesson for entrepreneurs and investors: there are multiple routes to success, and sometimes, the road less travelled can lead to more equitable and substantial value creation across stakeholder groups. It challenges the notion that massive fundraising and rapid scaling are the only paths to significant value creation in the startup world.

As India sprints to become a USD30 trillion economy, we need more paths for perseverant founders to create value for the nation, and this path is one of many that exist. May many more such paths emerge and many more Taruns and E2Es Blume (bloom :)).