I have tried to create a hybrid connection for my on premises SQL Server running on Windows Server 2012 with a named instance. I did provided my server address as the endpoint along with the 1433 port. I have also configured the SQL Server to static ports and also allowed outbound connections to these ports (9350 – 9354, 5671, 80, 443) as per documentation. However, when I try to access the database from my azure web application I get the "A connection was successfully established with the server, but then an error occurred during the pre-login handshake." (Full stack trace mentioned in comments).
However, when I try to create the hybrid connection to another on-premises SQL Server with default instance, with the same settings as above, it works fine.
Could not find a strong enough explanation for this behavior so far.
After quite some research and experimentation finally I was able to work out the solution for the problem. Actually one need to enable TLS 1.0 (from windows registry) for both your client and server.
Following are the correct value for registry to have your named instance work out:
Also note that Hybrid connection communicates via ports so be careful to see that if you have multiple instance of your SQL Server make sure each is listening at a different static TCP port.