Musical words — Exit (Successful Ones)

Introduction

Exit — the 4 letter word , an investor likes to hear .. and a successful one too …

In its short life of 8 years ( the 7 year itch is thru … glad ) .. Auxano has been able to deliver 1 complete exit in 2021 . 1 partial exit in Sep’22.

Another partial exit in June’23 and 1 more ( yes.. you are reading it right ) on the way in Sep’23.

All of these have been from the investments which were undertaken in the period 2016–2019 .

The works

Exits do take time in the Venture Capital ( VC ) world . Also liquidity comes out to play only when exit happens , unlike public markets .

Getting outsized returns is the main attraction for investing in this asset class . Besides contributing to the disruption which the product / service aims to deliver ( as it starts out)

Now , there is more data on the Indian VC space , which was not there when Auxano did its 1st investment in 2016 .

Auxano , when it started out , primarily, invests in an early stage , revenue generating business, which is in the early stage of a mega trend . Getting the direction right ( mega trends ) is important as also the driver ( the promoters running the company ).

Getting both right can in majority of the cases , does ensure that successful exits can happen . ( Auxano experience) .

As one invests today in an uncertain ( eco-system can change ) ,volatile ( could be ) world , getting the direction and driver synergy plays an important role.

And this comes into play in most of the cases , during the course of the investment . ( i.e. once the investment has happened ).

We all invest to get disproportionate returns ( that’s the VC story pedelled & which is not the case) in this asset class , which is mystery , as the story only unfolds gradually.

In the exits , we have had till now , what has been the common thread ?

• Getting the mega trend right ( here also pivot happens )
• Getting the right driver ( promoters run & execute , so the key )
• Adapting to the changes in the ecosystem
• Ability to listen ( very important)
• Proactive communication ( which also includes discipline in sharing information & MIS )
• Persistence
• Resilience
• Hustler ( ability to hear ‘No’ & still not get disspirited)

And if any one of the above is missing , the exit can become complicated !

What is important is how the promoters stick to the task & go ahead . Any verbal commitment from any entity for future investment, on attaining a certain milestone, should not be taken at face value. Unless there is a commitment in writing, it is of little worth.

Just as Auxano invests , our investors are our LP’s . From a corpus of Rs. 25 lacs invested thru a SpV with a handful of investors in late 2016, today it has 2 separate Sebi regulated AiF’s — catering distinctly to early stage & Growth stage businesses , respectively.

A wise person had rightly said — Begin with the end in mind . ( At Auxano , as we invest, we also look at exit timelines , which are communicated to the promoters too) .

Author:
Brijesh Damodaran