Success stories of Indian start-ups like Shiprocket and Bombay Shaving Company have made headlines as they emerged as symbols of innovation and success. But, behind these celebrated brands is a crucial support system, of the patient, long-term capital provided by a new generation of investors.

As traditional wealth management evolves, dedicated family offices are emerging as key backbones for these ventures, providing not just funds but also the strategic guidance needed to navigate India’s dynamic marketplace. 

One such investor who has helped shape the journey of these two start-ups, and many more, is Arihant Patni, Managing Director at Patni Financial Advisors. A veteran investor with over 100 start-ups in his portfolio, Patni spoke to Neil Borate, Editor-in-Chief at thefynprint about his perspective on wealth management and the Indian start-up ecosystem in the latest episode of Let’s Mint Money presented in association with Waterfield Advisors.

Watch the full episode below,

Patni, whose family founded Patni Computers, shared his journey from witnessing a business grow from inception to a successful exit to becoming a prolific angel investor. He offered invaluable insights for new-age family offices and budding entrepreneurs alike.

The genesis of a wealth manager

Patni’s journey into the world of investing has its roots in his family’s entrepreneurial legacy – his family started Patni Computers around the time he was born. “My memories probably go back to before I can even remember them. But, as I was growing up, I saw a lot of the Type A entrepreneurial approach that is common with successful start-up founders. Business was always first. Business came home. There were arguments, there was ideation,” he said.

He spoke about his modest upbringing and the frugal approach he saw growing up. “We had to make tough decisions and choices in terms of how to expand business, what to expand, and what not to and I think that is a very fundamental part of the early life of any business,” he said. This experience has helped him identify with the struggles of start-up founders.

Following the sale of Patni Computers in 2011, the family office took on a new prominence. Patni highlights his father’s foresight in setting up a dedicated team to manage their wealth, a practice that was uncommon at the time but is now gaining traction among new-generation family offices. The initial thesis was to grow the accumulated wealth “responsibly and with a certain vision”, primarily through public markets, before gradually diversifying into alternate assets like private equity and venture capital.

A multi-layered investment philosophy

Patni’s investment philosophy is multi-layered, distinguishing between his role in the family office and his personal passion for early-stage investing. While the family office’s public market strategy is largely data driven, with a sharp focus on large and mid-cap stocks, his approach to start-ups is more intuitive. “As an early angel investor, I think their data is limited. So, it is more about the conviction, the team, and how you feel about the business,” he said.

The family office’s allocation to start-ups started increasing, something he attributed to the sheer energy and excitement of the start-up ecosystem that emerged in the early 2010s. “We could play vicariously through founders that we fund, because there was so much excitement out there,” he further said.

According to Patni, the Indian start-up space has evolved significantly over the past decade and a half with founders, investors, and regulators all learning and adapting. This makes private equity and venture capital a natural diversification for any family office globally.

But, he also offered a word of caution against comparing public and private markets, calling it an “apples and oranges comparison”. The key differences are time horizon and liquidity. “When we look at early stage companies, we find good founders and good businesses that have the fire and the capability to grow. I think taking a bet on that, taking some reasonable exposure, could be very lucrative” he said.

Stressing on the need for patience and perseverance, he said: “I think to make any meaningful comparison, you need a 30-year window, and we don’t have that. We are just about midway through that. So I think we will have to have a bit more patience.”

Some success stories

Patni spoke at length about two of his successful investments, highlighting the different roles a family office can play at diverse stages of a company’s growth.

Shiprocket: Patni’s fund, Nirvana, invested inShiprocket in 2014 when its business model was different. The company’s success, he says, is a testament to the founders’ dedication. “They’ve pivoted when they had to, they innovated when they had to. That journey was all to the credit of the founders and their hard work, but it’s also great for us as investors and believers in them to see it play out, and it will be rewarding for everyone,” he said.

Initially a platform for small retailers to go online, the founders swiftly identified a pain point in backend fulfilment – of logistics, shipping and warehousing. They expanded their offering, which, combined with the “explosion of e-commerce in India” led to a recipe for success. This journey demonstrates the power of a founder’s vision, adaptability and a little bit of luck.

Bombay Shaving Company: Patni’s investment in theBombay Shaving Company came at a later stage, about 3-4 years ago, when the company was already a well-established player. While the entry price is higher at this stage, the business model is proven and the metrics are in place. He finds this stage “super interesting” because he gets to work with experienced founders like Shantanu Deshpande who are “ready to take it till the end.”

This later-stage investing, Patni explains, requires a different kind of due diligence. “Are your financial metrics in place? and is the founder as passionate and energetic as he or she was on day one?” are crucial questions. He believes that even with the acceleration of technology, a business journey still takes at least 15 years to mature.

The role of external advisors in legacy building

Talking about the role of crediting external wealth advisors, he said: “I think the whole ability to zoom out and think as a 30,000 level view is required at the end of the day.” It is crucial for setting reasonable goals and creating a responsible plan for wealth creation. “Frankly, we can only truly measure anything 10 years out or 20 years out,” he said, stressing on a long-term perspective on investment.

When asked about legacy, Patni, he added: “I haven’t quite formulated what legacy means to me. I’m still in the thick of things and honestly doing things for what I believe in. Generally, if you see it from a wider landscape, it means all of it. It means creating an institution where your name is not necessarily attached on a day-to-day basis, but it is still thriving, or it is building ways of serving the community.”

He concluded the discussion with a piece of advice for the next generation, going against the grain of his own “Type A Marwari business family DNA”: “Not everything is done for money.” While making money and creating wealth are important for serving a greater purpose, he highlights that “recognition” is not the only metric for success. Angel investing, he says, can be like that – it may not always provide immediate financial returns or public recognition, but it can be “very fulfilling” nonetheless.

Note to Readers: Lets Mint Money is a Mint editorial IP, in association with Waterfield Advisors. The series will see Neil Borate explore the personal finance perspectives of India’s accomplished corporate professionals, entrepreneurs, and family business owners.

Stay tuned for future episodes!

To know more about Waterfield, visit www.waterfieldadvisors.com