by Brian DeChesare Comments (14)

What to Expect at a Startup-Focused Investment Bank in India

Startup Investment Banks India

If you want to work with tech startups in the finance industry, you might assume that you have to be in venture capital.

After all, technology investment banking groups work with larger, more established companies… right?

That might be true in developed markets, but in some emerging markets, such as India, investment banks dedicated to tech startups have been popping up left and right.

To get the full story on this trend, I recently spoke with a reader who’s working at one of the leading startup-focused investment banks in India:

Why Are Investment Banks Advising Startups?!

Q: Normally, I start with your story and background information, but I think we need to address the big question first:

Why, exactly, are startups paying for investment banks to advise them on fundraising deals?

A: The startup ecosystem in India has been booming – it’s the #3 country for startups behind the U.S. and U.K.

So many new companies are being formed that fundraising has become difficult.

It’s tough for many startups to stand out and tell their stories effectively; one company often comes up with an original idea, and then dozens of others try to copy it.

Many entrepreneurs here also try to raise funding too early, i.e. right after they have the idea but nothing else – and no evidence of traction.

As a result, they start reaching out to banks early on, assuming that bankers can help them in this situation (nope!).

Also, new founders don’t know the right set of investors to reach out to, so they go to banks to gain access to VCs.

Finally, venture capital firms have struggling portfolio companies and have hired investment banks to help them raise funds or sell the companies.

Most participating banks are boutique or middle-market firms, but bulge-bracket banks may also advise growth-stage startups.

Domestic banks, such as Kotak, Motilal Oswal, Avendus, and Dexter Capital are involved, but some international banks, such as GS, MS, and Citi, have also been getting into the market.

One example is Paytm’s $575 million round, where GS and Citi both advised.

Q: Thanks for explaining that.

How did you win your current role at one of these banks?

A: I did a degree at a top-ranked commerce college in India.

I networked my way into an IB internship in my second year in college and then used that experience to win an offer at my current boutique bank.

Q: And what did they ask you about in interviews?

A: Many of the standard questions on accounting, equity value and enterprise value, and valuation came up, but they also asked about the fundraising process, the startup ecosystem, and why startups succeed or fail.

For example, they asked me why fewer startups were filing for IPOs and what that meant about their business plans and market conditions.

I was also judged on my basic modeling and PowerPoint skills, but I did not receive case studies or modeling tests. It’s rare to get those in India unless you have full-time work experience or you’re interviewing for buy-side roles.

If you want a case study example, check out our Uber valuation.

Your academic background and grades matter a lot if you interview at banks via the on-campus recruiting process, but if you win interviews via networking, they care more about your knowledge and how well you can do the job.

On the Job in Venture-Capital-Meets-Investment Banking

Q: OK, I see.

What is your average day on the job like?

A: The overall deal process consists of doing an intro call with a startup, analyzing its business model and industry, and then preparing marketing materials such as a financial model and investor presentation.

Then, we reach out to VC funds, see who’s interested, execute NDAs with the interested parties, and start negotiating the deal.

As the process moves along, we share more and more information with the VC fund.

That process means that my average day consists of two tasks:

  1. Calls and Preparing for Calls – If I do 4-5 of these in a day, that’s my entire day right there; I’ll usually do at least 1-2 per day.
  2. Financial Modeling and Presentation Work – I spend time tweaking existing presentations and creating new presentations and models.

The financial models are mostly revenue and expense projections. We work with startups, so there is no “historical data,” and all the future numbers are projected.

Two banks preparing financial models for the same startup might come up with different numbers.

The biggest difference is that our models tend to be monthlyVC firms always want to see month-on-month growth rates.

We also build in cases for different amounts of capital raised and different timing, and we adjust the growth rates and break-even points accordingly.

Q: Which types of VCs do you pitch these startups to?

A: We focus on domestic VC firms, such as Helion, Blume, Kalaari, Ventureast, Artha, and Kae, but we also reach out to the foreign VC firms.

Of the domestic investment banks, Avendus, Dexter, Spark, CreedCap, and Unitus Capital have all been active in the space (in addition to the international banks I mentioned in the beginning).

Q: OK. This role seems like a mix between venture capital and investment banking, but what’s the culture like?

A: Overall, it’s more like venture capital because teams are small – often fewer than ten people – and Analysts often speak directly with MDs, senior team members, and clients.

There isn’t necessarily a clear hierarchy as there is in the traditional investment banking career path, and junior-level team members can easily source deals.

The work hours depend on the number of active deals, but the average day is about 10-15 hours, and weekend work is common as well, particular when last-minute Monday morning meetings come up.

The Long-Term Outlook: Robust Growth Expectations?

Q: Thanks for that comparison, but I want to push back on a few of your comments in the beginning.

Specifically, how much can bankers really help startups? Aren’t VCs mostly looking for traction in users and revenue?

A: You’re right that if the founder knows what he/she is doing and already has product traction and VC relationships, we can’t do much.

But there are several common mistakes that we help founders avoid:

  • Story and Pitch – Many startups are horrible at presenting themselves. We help companies spin what they’re doing into sounding like they’re solving billion-dollar problems in a scalable way.
  • Investor Bias – In India, investors tend to prefer consumer (B2C) businesses over B2B businesses because they believe that B2C companies are easier to scale. We help B2B businesses present themselves as a bit more consumer-oriented.
  • Relationships – We’ve worked with dozens of venture capital firms, and we have key relationships everywhere. Even if a founder gets a warm introduction, it will be tough to win the attention of these firms, especially as a first-time entrepreneur.
  • Traction and Key Metrics – Many startups attempt to prove their traction, but they use the wrong metrics to do so; we help them highlight the right ones. For example, many consumer Internet companies focus too much on user growth and not enough on customer acquisition costs (CAC), which all investors scrutinize.
  • Process and Valuation – Many first-time founders aim for too high a valuation, which could result in an over-funded company or a failed fundraising; we help them temper expectations regarding funds and valuation and speed the process along.

Q: OK, fair enough. So, who would be a good fit for this role, and who would be a poor fit?

A: In India, it is tough to win investment banking roles unless you’ve attended one of the top IITs, IIMs, or some of the selected commerce colleges (or you’re coming from a Chartered Accountant (CA) background, and you’re applying to a bank that values it).

If you’re a career changer or you’re otherwise “off the beaten path,” you have a better shot at these startup-focused investment banks.

To do well on the job, you need to be comfortable with little structure, responsibility for sourcing and client interaction, and a different type of modeling work.

It’s feasible to get into venture capital or other banks from here, but it would be tough to win private equity roles.

So, if you have the stats to get into a larger bank, that’s probably a better initial option for exit opportunities.

But if you don’t, or you’re set on technology or venture capital, one of these firms could be a good option.

Q: Is that your plan as well?

A: Maybe! I plan to stay here for 2-3 years, as I still have a lot to learn in terms of pitching, presentations, and financial modeling.

In the long term, I want to go into venture capital or private equity, but I might switch firms and go to a larger bank first.

Q: OK, great, thanks for your time and for telling us about this sector.

A: My pleasure. Any time!

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

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  1. Thanks for the article!

    Quick questions

    – Given the lack of “historical data”, how would you come up with the assumptions and growth rates for the revenue/expense projections?

    – Are DCFs common in valuing startups (I guess comparables would be the first port of call)? If so, how would you go about calculating the discount rate?

    1. You would have to rely on comparable companies for a lot of the projections. So, look at what other startups at similar stages spent on engineers, sales/marketing, and so on, and how much they earned from users or downloads. But a lot of it would be pure guesswork, at least on the revenue side. Expenses are easier because you can establish how many employees a project will take and how expensive they are.

      DCFs are more common for life sciences startups because it is easier to estimate revenue there. For early-stage tech startups, you are more likely to use multiples such as EV / Unique Visitors or EV / Daily Active Users.

      1. Thanks!

  2. Vivek Pandya

    Hi Brian – Great article! I’m currently in the process of building a list of such Investment Banks to target (startup focused in India) – I was wondering do you have a list of firms besides the ones listed here (or suggestions on how to find more)?

    1. The ones listed here are the ones I’ve been able to find plus the ones the interviewee mentioned, so that is all for now. If you want to find more, look up recent VC fundraising activity in India and see if there’s a bank attached to the deals in press releases. You could also try Capital IQ, but they may not have some of the newer firms.

  3. Hey, sorry, I have a general question here. I received a verbal offer fro IB from a BB over a week ago, but I have yet to receive an offer letter. How long should I wait before following up with them for the written offer?


    1. Follow up now. Always follow up if you haven’t heard anything in at least a week.

  4. Thank you for insightful article. Can you please list UK that do this as well?

  5. Are there similar firms in the US that do this as well? Would be interested in a list of those….

    1. There are similar firms, but they tend to be more diversified and do more than just fundraising (and they work with more than just traditional tech startups)… a few examples:

      You could even argue that some of the better-known tech boutiques, such as CODE Advisors and Union Square Advisors, fall into this category because they do fundraising deals as well.

  6. Interesting article. I am at a small regional boutique IB and have worked with two start ups thus far. One with a few million in revenue and another pre-revenue, both trying to gain VC funding. Deals like this aren’t typical for us, but we are starting to see more of them in our region.

    1. Thanks! Yes, startups are definitely working with banks more and more. Maybe not in all regions, but definitely in countries with a fair amount of startup activity.

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