FINLATICS IBEP 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 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 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 investors 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 in 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 percent 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 honoured 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. These 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
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 are investment bankers. Investment bankers helping 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 institution 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 last from three to twelve months. It
provides a combination of education, mentoring and 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 investor 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 gets 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 file sharing and analytics tools to assist
with such assessments. Only around 15percent 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 favourable 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, specially 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