The emotional rollercoaster of a start-up exit

In the early 2000s, my world was the vibrant and uncertain realm of green coffee trading. Every day, as I navigated between the bustling trading floors of London and New York and the sprawling coffee farms of Vietnam and Thailand, a singular thought gnawed at me: Why was this industry, so rich in history and complexity, lagging so far behind in technological innovation?

The early mornings in dimly lit rooms, filled with the aroma of freshly roasted beans, contrasted sharply against the clunky, outdated systems we relied on. The industry was frozen in time, resistant to the digital wave sweeping other sectors. I was a young commodities trader, enthralled by the process yet frustrated by its inefficiencies.

This dissonance between the old and the new sparked an idea to revolutionise the commodities trading industry. Thus, Eka Software Solutions was born in 2004, fueled by a burning desire to bring technological sophistication to an arena steeped in tradition.

Gratitude and Growth

By early 2014, Eka was forging ahead, having reached $34 million in annual revenues with 30% EBITDA, two acquisitions under its belt in Canada and Australia, and raised significant capital from Silverlake, a major private equity player in the US. We were charging ahead on our vision to build a global leader in commodity trading software from India.

My bet on transformation versus tradition had paid off. Yet, amidst the success, I often think about the journey and the people who made it possible.

For starters, there has always been the unwavering belief of my first investor through this roller coaster ride, Mr Kirit Shah, Chairman of the GP Group, and the rest of Eka Software’s institutional board members Sandeep Singhal and Bryce Lee.

Over the past decade and a half, I am grateful to Eka Software’s management team for buying into my vision and running with it to grow into leadership roles. Eka’s head of HR and sustainability Shuchi Nijhawan, CTO Mumu Pande, Rahul Jain in Engineering, Amit Sureka in finance, Prachir Dhandhania and Gaurav Shah in product, Suryatej Sonawane and Vinni Malik in professional services, as well as Sumarani Sarkar in the crucial talent acquisition and development function – all of you have grown with Eka Software. Special thanks to early members Karthikeyan N, Shobhit Mathur ,Vinayak Mungurwadi, Sanjay Singla, Rick Nelson, Lynn Lattimer, Rajeev Warrier.

What makes me happiest as a founder is that many of the C-level executives who have been a key part of the smooth handover of Eka to STG Partners and the Quor Group this year, have muscle memory from the 2014 journey – of moving the software platform from licence to cloud, while managing the commodities downturn.

The Hard Decision to Leave

There are no two ways about it as a founder: Selling your company is an emotionally sapping decision, especially if – like me – you are a first-generation entrepreneur.

For starters, it is extremely difficult to create a sustainably running company from scratch. Eka Software has been profitable for most years, barring the three years when we took the product to the cloud from 2016 onward. Its profitability rose to high double digits since FY 2021. Plus, there’s substantial headroom for the profit margin to grow.?

In such a context, it is natural for a founder to feel, “I can run the company forever,” because the topline and profits are growing. So why not continue to run Eka and build on it, especially with the technology moat we built in the industry?

Many a time, a business compounds simply because the founder perseveres in a business with high profitability. I have seen several family-run businesses do this beautifully – using profits from a flagship business to foray into new business lines and add new products. So, staying on to grow Eka was the first emotion I felt when we began to evaluate buyout offers two years ago.

But at another level, two unique thought processes in late 2022 made me look beyond Eka. First, the itch to jump into something completely new in the world of start-ups and venture capital. There are a lot of risks that come with changing your persona from an operator to an investor which calls for a coach’s persona.

I have been an angel investor, but with start-ups becoming part of India’s zeitgeist, I began to think about how I can be part of creating the infrastructure and building-blocks for start-ups.

More spectacularly, Generative AI happened. It was the ultimate driver of my decision — that I have to ride this AI wave with new eyes.

India is in a strategic position in the globe. Start-ups have become an important part of India’s economy. With AI’s ubiquity growing, I could leverage all my experience — from starting a company from scratch, building a global GTM and understanding technology – in value creation, and look beyond Eka.

This was the right time to exit.

No surprises, but my family, who have been with me through the Eka journey, were baffled. They wondered why I wanted to sell the business after years of toil. In India, there is an undercurrent that your children can inherit your business. And it’s very hard to create a company. So the discussion with my family about ‘What next!’ was vital. It wasn’t just an emotional decision for me.

Where family businesses have the capital and a lot of accumulated assets, I had done everything as an entrepreneur for the first time in my family. Money was not the biggest driver, though it is an important aspect of planning an exit. There was no question about retiring young. I am not done as an entrepreneur yet.

And what will happen to employees, especially those who have worked with Eka Software for more than 10 years? Will they be taken care of under the new owners? All these thought processes made for a roller-coaster of emotional and complex discussions with my family, myself and Eka Software’s employees.

Execution is the best bonding experience

In many ways, all of us at Eka Software experienced two arduous spells of challenges in the environment between 2016 and 2021. On both occasions, we rose to the myriad challenges before us. We grew.

My first hard call was to increase investments in technology between 2015 and 2019, when the average price of Brent Oil was $57 per barrel (bbl), compared to $91 bbl in early April. The picture was sombre even in the commodity and base metals markets. It was the toughest macro environment to innovate in, as we took Eka Software from a licensed product to cloud-based software offerings. It turned out to be timely.?

By late 2019, the $2.5 billion CTRM (commodities trading and risk management) software market witnessed consolidation. In just three years, Aspect Enterprise Solutions, OpenLink Financial and Allegro Development Corporation got acquired by ION Group, a multi-billion dollar company. That’s also when Eka Software Solutions began to get buyout offers.

It isn’t so obvious in the technology industry, but a large chunk of the systems integration work in the CTRM universe is carried out by technology services companies. And there is still a lot of room for automation and product innovation. So, the demand for product companies like Eka was huge, and the doors were open for an exit. Until the world got hit by the COVID-19 pandemic.

The first wave was about survival before we stabilised the operations. Commodities trading is a high-touch business that involves a lot of travel for sales teams. Our customers are global companies like Cargill, Unilever, Transcanada, and Rio Tinto. When everything moved to Zoom, it was a fundamental shift to online conversations with CEOs of our top 50 customers. It gave us an opportunity to move towards higher profitability, as Eka Software’s SaaS flight was more organic than we initially anticipated.

In the commodities markets, entire supply chains got disrupted. As hard as that phase was, it sparked off the upcycle that the commodities market is currently in. (Knock on wood!)

Family and Future

By 2022, it was clear to the operator in me that Eka Software was ready for the new upcycle. What’s more, our engineering and management team had come of age. As I said earlier, the AI wave that began in October that year thanks to OpenAI spawned a whole new area of interest for the entrepreneur in me, and the Together Fund with Girish Mathrubootham had also taken wing in 2021.

For entrepreneurs, it is absolutely vital to have a strong anchor through a two-decade journey. My wife, Mitali Gupta, has been that anchor. As Steve Jobs once said, "You can’t connect the dots looking forward; you can only connect them looking backward." Reflecting on my journey with Eka, it's clear how each step, each decision, was part of a larger picture leading to new opportunities and horizons.

In the concluding part of this post, we will go into the mechanics and larger questions that come into play while completing a strategic acquisition.