Finlatics Investment Banking Experience

Program - Project 3

1. A sector agnostic fund is a fund that has a diverse set of investments in

various sectors and industries. This can help the investors to minimize
their risk and avoid incurring any loss due to market dynamics. Even
though it can look like an attractive choice for a fund manager, it requires
the investors to have a broad knowledge of different industries. It also
requires the fund manager to be an expert in his or her field as a sector
agnostic fund if consisting of a large number of unprofitable investments
can get the investor very less return to his investment. It is for these
reasons I would like to set up a sector specific fund.

Funds which invest in a particular sector or industry are said to be sector-

specific funds. Since the portfolio of such PE funds consists mainly of
investment in one particular type of sector, they can offer above average
returns and are considered to be risky for the same reasons. These risks can be
minimized by extensively researching and then targeting a particular sector.
Such funds also attract investors with years of experience and resources in that
particular sector.

2. Out of all the sectors, the focus of my PE fund would be on E-commerce

and Digital media sector. After covid-19 and the increase in the volume
of online content available people are getting more attracted to
consuming data online and shopping for products online. These particular
sectors have a lot of scope and profitability in the long run.
Following will be some of the investor types I would look for :

a) Subrata is an entrepreneur turned VC, and joined Accel when Erasmic

Venture Fund (a firm that he co-founded) rebranded to become part of
Accel.Subrata was the first investor in CasaOne, Curefit, Flipkart
(substantially acquired by Walmart), Juspay, Moglix, Money View, Mu-
Sigma, Myntra (acquired by Flipkart), Scripbox, Virident (acquired by
Western Digital), WIBMO (acquired by PayU), and several other
category leaders. His knowledge and experience gained from all these
ventures can provide a lot of insights to the start-ups in my PE Fund.
b) Ekta Kapoor is one of the most popular Television Serials Producer,
Film producer and film maker in India and other countries. Apart from
Television film making, Ekta Kapoor is also the Joint Managing
Director of Balaji Television Ltd., which is one of the biggest privately
held production house in the country. She has produced more than 50
Television Serials and 30+ Bollywood movies. All this experience and
contacts in the industry can serve as a great asset for companies entering
the digital media sector.

c) Ratan Tata is the chairman of Tata Industries, and a vivacious industry

leader, is also an active angel investor in India. He has mentored and
profiled a number of start- ups, ventures and businesses with
investments, advice and much more. With names like Urban Clap,
Xiaomi, Moglix and Snapdeal under his hat of expertise, he is touted as
one of the major players in angel investment community. His vast
portfolio and years of built relations through tata industries can help
tremendously in building the ventures in my fund and will also provide
a certain amount of goodwill and stamp of quality.
d) Sachin Bansal is an Indian entrepreneur. He is best known as the co-
founder of Flipkart, that was acquired by Walmart (77 per cent
stake) at $16 billion in 2018.
During his over 11-year career at Flipkart, Bansal was CEO and chairman.
In 2018, Bansal exited Flipkart following the Walmart deal. He founded
BACQ Acquisitions pvt ltd, a venture capital focused on building and
acquiring businesses in diverse industry verticals. He has also invested in
Ola cabs, Grey orange, Unacademy and Teamindus.

e) Bhushan Kumar Dua is an Indian film producer and music producer. He

is the chairman and managing director of Super Cassettes Industries
Limited, also known as T- Series. He is known for his works in
Bollywood. As managing director, Kumar diversified the company's
business into electronics, CDs, audio/video tapes and cassettes and film
production. For this and for popularizing Indian music overseas, he was
honored by the Government of India's Electronics and Software Export
Promotion Council.

f) Premji Invest is a private equity fund owned by Azim Premji, which

manages over $2 billion of Azim Premji’s personal wealth and his
family’s wealth by investing in capital markets and picking minority
stakes in start-ups, including homegrown e-commerce companies such as
Flipkart and mobile payment companies such as Chennai- based
 Financial Software and

Systems. Some other investments by Premji invest are HealthCare

Global Enterprises ltd. , Myntra, Snapdeal and Amagi Media labs.

g) Mahindra Partners is the private equity fund of the Mahindra &

Mahindra Group. It was initiated with an aim to nurture emergent
businesses across various sectors. Mahindra Partners aims to not only
offer financial support to its portfolio companies but also help them
grow with
their experience and mentorship. There investments include ZoomCar

3. With new start-ups sprouting every day, the average success rate for
start-ups is falling. That being said, the criteria for selecting a successful
start-up must be stringent. Out of the 6 stages of the company lifecycle,
the core focus of my PE fund would be the first stage of
commercialization and the early growth stage. This is because even the
most brilliant ideas need guidance to understand the business ecosystem.
Investing at an earlier stage could help the start-up and thrive and bring
high returns.

First Stage of Commercialization

This is the second stage of the company life cycle. At this stage the start-up is
still new but has crossed the ideation stage and is looking for an appropriate
sales channel strategy for its up and running product. The perfect product-
market fit helps sustain.
the product’s growth and profitability and is difficult to determine without
the guidance from an expert. With the help and expertise of the mentioned
investors, I intend to target start-ups at this stage. From an investor’s
perspective, this stage of start-ups is pretty attractive as it is associated with
high risk which may correspond to greater returns. For example, Sanjay
Mehta invested in OYO rooms at an early stage and earned 280 times
returns. Most of my targeted
investors are risk-taking and hence inclined towards early-stage financing.

Early Growth Stage

This is the third stage of the company life cycle. By now, the start-ups have
found their perfect product-market fit and are now penetrating the market. Most
of my targeted HNIs are core investors of first stage of commercialization and
the targeted family offices invest in both first stage of commercialization and
early growth stage. However, early growth stage is still my most preferred
stage, this is because investors prefer taking a different route when investing
through PE funds since they have a bigger ticket size than direct investments.

By pooling in money through various investors, PE funds can make a more

significant impact on growth stage funds corresponding to larger gains.

4.

Start-up scouting is an integral part of any successful start-up corporate

engagement. It's the process of identifying, evaluating, and selecting the best
start-ups to work together. It is a challenge for a PE fund manager to come across
the right companies in the vast world of entrepreneurship. The number of start-ups
worldwide is constantly growing, as evidenced by the significant increase in the
number of start-ups in the past years.

Network Driven Scouting

Network driven scouting is done with the help of professionals working
continuously in this area. One such example of these professionals is
investment bankers. Investment bankers help in the screening process by
picking out start-ups suitable for a particular fund and thus saving a lot of time
and cost. A PE Fund can give their requirements like the sector and stage of
company they are looking to invest in.

Institution Driven Scouting

Start-ups can take help from various institutions in order to accelerate their
business ideas and models. Incubators help entrepreneurs solve some of the
problems commonly associated with running a start-up by providing
workspace, seed funding, mentoring, and training. Accelerators are programs
that intend to accelerate the development of early-stage companies or ideas.
Generally speaking, an accelerator is a fixed term program that usually lasts
from three to twelve months. It provides a combination of education,
mentoring, and networking, often with investment. It is distinct from other
forms of investment and incubation, such as angel investing, grants, or
incubators. Thus, these institutes can help my PE fund by getting the start-ups
to the ideal stage of business lifecycle in which I would like to invest in. Most
of the ventures found in these institutes are in the first stage of
commercialization. One of their jobs is to help start-ups get funded so they
need PE investors as much as PE investors need them.
5.
The first stage is screening – first contact if you will. This is when the first call
or meeting between the venture capital firm’s management and the start-up
firm’s management occurs. A bit like political dignitaries meeting for the first
time. The beginning of the process where pleasantries are made, business cards
are exchanged, and top dogs get to know one another. The VC firm will be
assessing risk, market size and industry to determine if the opportunity falls
within their business objectives. A good collaboration platform will offer secure
files. Only around 15 per cent of deals ever progress past this first screening
stage, so the odds are against both the VC and the start-up. Enterprise
collaboration may tip the odds in a slightly more favorable direction.

Size of the market

One of the most crucial tasks an entrepreneur has is to calculate the size of their
market, and the potential value that market has for their start-up business.
Without this data you can’t create a viable business plan or be taken seriously
when approaching potential investors. Determining the market size is critical. It
tells you and your partners, team and investors how much potential business is
really out there. It helps calculate how much value there really is for your
individual venture. This is critical to know, especially if you never plan to raise
a dime in outside capital. Therefore, a startup that is aiming big and can be
durable for a long period of time is preferred. Large market size would lead to
high returns in the future which would increase the probability of a trade sale.
This attracts investors because it gives them a potential way to exit their
investment.

Growth & Performance of the company

Analyzing the growth potential and past performance of a start- up plays a key
role in predicting how future of the company and in valuation of the company.
Ideally a venture capital looks for a start-up performing efficiently and having
great growth opportunity in the future. This can ensure the investor that the
business will get the opportunity to capture significant market share and thus
can appreciate their initial investment.