VCs and PE Investors: ‘Quick-to-sell’​ & ‘Built-to-Last’​ Businesses

At Excelsoft, I raised very little VC Money in the first round; this was in the year 2000, and the valuations were not good. I was naive and gave away 33% of equity, plus OCCRPS, for a 1.5 Cr. investment. We were starting an edutech business, and that time it was new and investors were skeptical. After 7 years, and a lot of pressure from Investors, we gave them a fantastic exit in 2007. They did a secondary sale and exited by making a whopping 123 Cr. Not Bad! They sold to a bigger American PE, and as usual it is about growth and exits.

The pressure was immense. We even paid quarterly dividends, and at that point in time the DDT (Dividend Distribution Tax) was on the company. The surplus we were planning to invest back in growth were paid out as dividends. And then there was the pressure of EXIT. I, as a promoter, decided to exit the investors fully out of retained earnings plus leverage.

How nice it would be if the investors understood the promoter, the team, the product, the opportunities…

However, when we were passionately discussing opportunities and growth plans, one of our directors told me that for a VC or PE, investment is money, product is money, working capital is money, sales is money, profit is Money, and the exit is ROI —  money again! One of the directors on the board from the VC said, “You could even be manufacturing bricks (he saw a brick kiln at a distance) as long as you deliver growth, profits and returns”. That was an insensitive remark. While entrepreneurs are the passionate types, such ‘ideas’ can really hurt.

I eventually put together an exit strategy by using up every penny of our company’s retained revenue, my savings, plus the leverage. But I have 100% of the company now, along with the ‘freedom thought’ to plan with my team and build products and services that are best-in-class in the edutech space, not to mention great schools of our own run.

I now own my company; my freedom of thought is back, and our agility in responding to business opportunities is agile.

I have realised that there are two kinds of companies — the ‘quick to sell’ and the ‘built to last’. They are two different schools of thought. If I have a portfolio of investments, I’d like to build a couple of businesses that are ‘built to last’, and maybe a couple of hyper-valued ‘quick to sell’ startups!

I have had the satisfaction of building my company with my ‘freedom of thought’ — not by being constrained, driven or chased to deliver numbers, quarter upon quarter.

I have heard that strategic investors can make a lot of qualitative difference with their investments. Haven’t tried that one, yet.

About the author

D Sudhanva is the founder and CEO at Excelsoft Technologies, a globally renowned eLearning Solutions Company. With a focus on transforming education across the world, Sudhanva has steered Excelsoft to be a thought leader in Education Technology with robust products delivering innovative solutions.