On May 15th, 2018, our portfolio company E2E Networks listed on the National Stock Exchange’s SME platform NSE Emerge. The IPO was cited by many observers and the startup press as a seminal moment in the young Indian startup ecosystem. It established that a hard-fought profitable path for a company is also very rewarding through this Listing mechanism. It opens up a new funding avenue for startups, outside the limitations of growth stage Venture Capital. We are very proud of E2E, which reached this stage with an incredible ROE over its 8 years of existence. While this Emerge exchange has witnessed over a 100 issues over the past few years, this was the first VC-backed profitable company to explore the SMB exchange route.
While the issue was priced attractively (INR 57) for public investors (the issue was oversubscribed 70x, receiving bids for 270.84 million shares against the 38.6 million on offer), the opening bell yesterday saw the price discovery at INR 85 followed by hitting the upper circuit breaker at INR 89.25, where it stands on Day One – a 56.5% Day One rise from its issue price.
E2E, a cloud computing startup has been a classic example of a profitability + growth model and this listing was a brave first step in this new growth phase of the Company’s growth. Karthik Reddy, Managing Partner, Blume Ventures, adds “Tarun, Imran and the E2E team grew the business against all odds, delivering for Indian clients who needed a reliable, cost-effective and scalable cloud computing platform that delivers most of the core value of the larger public cloud companies at a full-service cost & quality structure that no one can match in the country. The public markets seem to have understood and backed this promise more than the private venture markets which came close to backing but never ultimately believed that E2E can compete and win against these odds.”
Blume will hope to showcase this SMB IPO path as a strong one for long-term, tight governance-oriented startups in its portfolio that are happy to build towards profitability and sustainability. With E2E’s success, we envisage some more Blume portfolio companies, as well as many others in the ecosystem, believing in this path. Once the company establishes confidence with a wide base of investors and can multiply its performance and profitability over 2-3 years, these companies will be primed to (automatically) migrate to the main bourse- a path prescribed by the exchanges for strong companies such as E2E Networks.