Why This VC Walked Away from Startups to Fix Salons and Scale SMEs
In Conversation With Sanjay Ennishetty
Sanjay is a seasoned business leader with over 20 years of experience across venture capital, startup advisory and strategic growth consulting. He is the former CEO of Naturals Salons, one of India's largest salon chains.
Currently Sanjay works closely with growth stage SMEs, helping them scale operations, professionalize teams, and prepare for IPO & strategic fundraising. His expertise spans across business strategy, digital transformation, innovation and capital advisory. Over the years, Sanjay has mentored several startups, advised founders on navigating market challenges, and worked with investors to identify high-potential opportunities.
Key insights, from Sanjay himself:
1. Startups are in a bad place right now but no one wants to admit it.
Honestly, the startup scene, especially SaaS, is going through a rough patch. I was speaking to a CRM founder recently. He told me returns are down, layoffs are happening, and most companies around him are dealing with the same. But no one’s talking about it publicly. Everyone’s pretending it’s fine on the outside.
What we’re seeing now is the hangover of that old VC model: burn, burn, burn, raise more, dominate the category. It worked for companies like Ola, Zomato, and Swiggy. They raised endlessly and outlasted everyone - they’re a duopoly now. But that playbook doesn’t work for everyone. Not anymore.
AI is also shaking things up. SaaS models that were stable three years ago feel fragile now. Founders are being pushed to show profitability. Capital is slower, and honestly, I think it'll take a few quarters for things to settle.
2. These SMEs are solid, but they’re stuck.
In the last 18 months, especially during my time at Naturals, I got to see them work up close. And let me tell you, these are some fantastic businesses. Strong brands, cash flows, loyal customers. Weekly revenue coming in. Very real.
But most of them have hit a wall. The market has changed. Customers expect more, tech has become a baseline, and younger companies - Zepto and likes - are moving fast and grabbing market share. These SMEs weren’t ready for that.
They don’t have a CFO, CMO, or CTO. Teams are all internal, homegrown. They’ve done a great job so far, but now it’s become a limitation. They need structure. They need systems. That’s where I’m spending my time, helping them move from stable to scalable.
3. One thing I love about SMEs - they’re realistic about value.
See, in the startup world, you throw around 10x, 15x multiples for valuation like it’s normal. But SMEs? They’re grounded. When I was working with a 250-300cr SME, raising money… I put a number on the table based on what I thought was fair. The board immediately pushed back. They said, “Too high. Let’s not go beyond 3x or 4x.” And they were right. They knew what the market would actually pay. There’s no illusion here. You don’t have to fight inflated expectations or explain the basics. It’s refreshing, honestly.
4. In the next 5 - 10 years, we’ll see massive SME transitions.
This is something no one’s really paying attention to, but it’s coming. A lot of SME founders are in their 50s and 60s now. Their kids either don’t want to take over or want to run things differently. And that creates friction. It’s a huge stress between generations. I’ve seen it firsthand in multiple families. Good businesses are getting stuck because there’s no clarity on what’s next. What Japan saw in the last decade, we’ll see in India now. A wave of businesses is consolidating, shutting down, or changing hands. And if we can come in with the right capital and guidance, we can make those transitions smoother. This has been a recurring theme emerging from conversations with multiple industry practitioners.
5. Most SME founders don’t even know what they can unlock.
There’s a massive awareness gap. I’ve sat with promoters and when we talk about IPOs or secondaries or even structured growth capital, they’re stunned. They ask, “Is this possible?” At Naturals, when we walked through similar case studies, people were genuinely surprised. Now I see larger IB outfits setting up shop in regional locations to focus on this space. They’re educating founders, pushing them toward IPOs, exits, and professionalisation. But we’ve barely scratched the surface. If we can solve for awareness and just show these founders what’s possible, we’ll unlock so much latent value in this ecosystem. And honestly, this is where I’m increasingly shifting my focus.
6. Evolving Investment Strategies and Market Consolidation
What I’ve noticed in the last year is that capital itself is shifting. Earlier, it was all about tech startups, early-stage SaaS, disruption, all that. But now, even the VCs are slowly moving towards mid-market. As an example, we can take A91 Partners. A lot of them are now looking at non-tech companies, cash-flow businesses. Retail, distribution, healthcare, and even services. Basically, boring businesses.
And if you ask me, roll-ups are becoming the smart way to grow for bigger companies out there. I’ve spoken to a few promoters who’ve got clean credit lines from banks just for acquisitions. Banks are also sitting on capital and looking for secure ways to lend, and SME consolidation is starting to fit that picture.
We’re going to see more and more of this. I keep saying - by the next one or two years, every fund will try to incorporate SME in the mix.
7. Navigating the Human Element and Promoter Mindset in SMEs
One thing people don’t realise when they talk about SMEs is that you're dealing with people. And that’s the tricky part.
Most promoters have run their businesses independently for 20–30 years. They’ve done it their way, on their own terms. They’ve always dealt with banks - pay the EMI, no questions asked. So when investors come in and suddenly there’s a board, reporting, accountability - they don’t like it. They’ll say, “Why should I answer to someone now?”
And when you talk to them about selling a stake or taking a secondary exit, a lot of them ask, “What will I do with this money?” They’ve already built their life - assets, cash flow, everything’s sorted. They’re not greedy or chasing unicorn status. They’re grounded. That’s why the MBA-style, top-down approach doesn’t work here. You can’t walk in with a deck and fix things. These founders have built companies from scratch. You need to come down to their level. You have to change your attitude, your pace, your language. Otherwise, nothing will move.
And honestly, there’s still a huge awareness gap. Many promoters don’t even know what kind of valuation or exit they can command. When I share examples, they’re surprised - “Is that really possible?” So yeah, capital is one part. But trust, empathy, and education is what really makes the difference in this space.