Mumbai: The stellar listing of cloud computing infrastructure platform E2E Networks Ltd backed by early-stage venture capital (VC) firm Blume Ventures earlier this week could open up a significant opportunity for VC exits through this route, say experts.
The company’s SME initial public offering (IPO) closed on 7 May with a subscription of 70 times. On its listing on 15 May, E2E’s shares closed 56% above its issue price of Rs57.
E2E is engaged in the business of cloud infrastructure which includes servers, networking, storage, virtualization and other open-source software pieces. Blume Ventures sold 730,000 shares in the IPO. For E2E Networks, the IPO marks the conclusion of a remarkable journey for a start-up that struggled to attract any meaningful attention from investors when it started out, but has ended up multiplying its revenues since then, said Karthik Reddy, co-founder and managing partner at Blume Ventures.
“The company grew to this point with less than $0.5 million in total equity financing in its lifetime and a peak debt of less than $1 million. Now, with a fresh primary infusion and ability to lever that equity, the company can finally drive the growth they’ve been planning for a few years but for which they haven’t had the cushion of expansion capital," said Reddy.
Industry experts believe that the successful IPO and post-listing performance of E2E networks will open the opportunity for other VC-backed companies to unlock value and provide exit route to their investors.
“If you see, there are several companies that are growing 20-30% year-on-year and continuously profitable for at least a couple of years, but VCs are not interested. So, for VCs who are already present in these companies, this becomes a great route to realize their investment," said Anil Joshi, founder of early stage VC fund Unicorn India Ventures.
Overall this offers a great opportunity for not just VC-backed companies but even bootstrapped companies, he said, adding that this will be a viable exit opportunity for VCs going ahead.
According to Joshi, the opportunity has opened up with the maturing of the SME exchanges, which has seen investors appreciate the companies listing on these platforms.
“Earlier, there was an issue of getting acceptance on the SME exchange. Companies were getting listed but there was no traction. But investors are now starting to appreciate the kind of companies that are getting listed on these exchanges, which has started building confidence of companies getting listed," he said.
However, some investors expressed a note of caution and said that one needs to wait and watch how the stock and the company perform going ahead.
“I am not convinced that a Rs120 crore market cap company should be listed. Institutional investors and analysts will not give it coverage. I may be wrong so will watch how this plays out," said Deepak Shahdadpuri, founder, DSG Consumer Partners in a tweet on 16 May.