RSVP Capital, Stepping up the Investment Banking game
With a wealth of experience in the investment banking domain, RSVP Capital Advisors aims to differentiate itself with their hands on approach to fund raising and consultant services in addition to their own enterprise investments.In conversation with YourStory.in, Rahul Tadimalla goes deep into the RSVP Capital business model and shares his advice on what it takes to survive as a startup in these times.
Rahul, tell us a bit about RSVP Capital.
RSVP Capital Advisors was founded as a boutique corporate finance advisory and investment banking firm, helping entrepreneurs and SMEs with their growth and fund raising strategies. The core USP of RSVP is the wide network of HNI (High Net Worth Individuals) investors and Ultra-HNI investors we bring to the table, augmented by strong relationships built with institutional investors including banks, VC and PE Funds – which we believe no one else currently offers.
When was RSVP Capital started?
RSVP commenced operations and its fund raising activities in October, 2009. While the business conceptualization and steps towards initiating a fund raising entity started in July, 2009, we formally commenced operations later in October. We got our first client almost immediately, and achieved a verbal commitment of first financial closure within 42 days of signing up. Our first deal remains one of our bigger and most complex deals we have worked on. It was instrumental in validating our business and in initiating our shift from the buy-side to the sell-side investee representation. We have not looked back since.
Tell us a bit more about the services you offer.
Our core service offerings are categorized as fund raising services to the entrepreneurial and SME community in India, Singapore and the US.
Our secondary offerings are consulting services, helping businesses prepare pitch books and other ancillary documents required to present to potential investors, institutions and prospective clients.
We have held mandates across diverse sectors and worked with entrepreneurs in multiple geographies. As regards our fund raising activity, we liaise for both debt and equity funding services, right from funding companies in the early angel space to those in the pre-IPO growth stage. Our investment sweet spot is a transaction size ranging between $0.1 Million and $10 Million for equity funding and up to $50 Million for debt financing / syndicated ECBs (Foreign Currency Commercial borrowings). As a new boutique investment bank, we are not experts being focused on only a few areas; rather we are sector agnostic in our approach, and are open to funding any ventures operating in a good niche space, which have carved out a compelling value proposition for themselves, which have an incumbent strong team with relevant segment experience, and which are scalable & sustainable in nature.
As an investment banker, what according to you are the challenges that startups mostly face?
One of the biggest challenges startups in India face today is their underestimation of capital needed to run the business effectively. They delay their fund raising efforts to when they visualize themselves in a cash crunch and are willing to raise an amount much smaller than what they need. Due to the situation they face, they are willing to dilute a larger stake than what they actually should.
Another challenge faced by startups is the lack of access to capital, especially smart/strategic capital. By smart capital, we mean access to investors who not only provide them with a financial investment, but they also bring other strategic value-adds on to the table, augmenting the overall effect of their involvement with the startup. Choosing the right ‘strategic investor’ into a company is a skill which all startups don’t necessarily own, primarily due to their lack of network and reach in the space.
The third challenge we see in startups is their ability to pitch their business idea and USP to an investor in a way that is investment-attractive and “music to the ears” of potential investors. Preparing appropriate investment teasers, IMs, financial models and business presentations is a science which all companies don’t necessarily possess. Presenting it in the style friendly to investors is both a science and an art, nurtured over time with experience. This is where investment banking outfits come into play, who offer more than just our network of investors with multiple interests.
This does not take away from the fact that promoters of startups are excellent presenters of their business idea; in fact they may be the best people to put forth their proposition, as it is their business. But not everyone has the art of impressive presentation skills. Especially presenting in a format which is programmed and relevant to each unique investor, vis-à-vis the latter’s portfolio mix, stage in the cycle of the fund, the horizon of the investment, etc.
Are you looking at investing as well?
Yes, we do look at making investments on a case-to-case basis. We don’t look at every venture that we come across from an investment angle, however certain ventures which fit our appetite and exposure level certainly attract us. Further, our investing a small percentage would induce further confidence in our investors to the transaction, both from the view of co-investing as well as towards participating in subsequent round(s) of fund raising. We also get exposure to, and participate in the growth of our startups by taking equity in them as part of our consulting or fund raising compensation. Yet another different way of investing is by representing our investors in sourcing them a deal, and they giving us part of their equity as incentive to manage the investment, or as part of our advisory compensation.
Name some of your clients.
Some of the clients for whom we have closed investments recently are MentorSquare Advisors Ltd – an SME Mentoring & Consulting Firm, RenewGEN Enviro Ventures India Pvt Ltd – A ‘Waste-to’ Energy’ startup, operating in the Asian Municipal Solid Waste Management space, IBSFINtech India Pvt Ltd – A Financial Software Venture, focusing on Treasury & Trade Finance functions of large Export-Import Companies
How big is your team?
Our Core team comprises of 2 partners – myself & Anil Kumar S N. The partners are responsible for business origination, all deliverables and deal closure. I predominantly am responsible for sourcing investors / raising funds and scouting for deals, whereas Anil is responsible for all activity under the management consulting wing. The rest of our admin, legal and accounting work is outsourced. We believe in keeping a lean-and-mean structure in our venture. Aside from our business, strategy and budgeting functions, everything else remains outsourced to specialized agencies and firms. We do look for interns and summer associates from reputed MBA schools to assist us from time to time. To strengthen our repository of research and widen our footprint amongst potential startups and SMEs, hiring young talent would be the ideal avenue. This would enhance our brand value and broaden awareness about our firm with future clients.
Any specific advise that you would like to give startups looking to raise funds?
I could go into pages. But some of the immediate points that come to mind, which I believe are very critical to the survival and growth of our startups –
Startups should carefully introspect and understand themselves and their own business idea thoroughly, before they come out and present to investors. They should keep asking themselves questions as to whether this is what they want to do, can do and are passionate about the idea and its potential success irrespective of what the market thinks, or their detractors criticize. Do they believe in the potential of the idea, and have a strong conviction of its ability to pierce through the market? Do they believe they have a team that can cross all hurdles and pull off taking it to the next level? This is an on-going process. These questions may need to be asked over and over again, with changing personal, professional experiences and economic scenarios.
They should conduct a thorough analysis of the market, and assess where they fit into it. This may include a comprehensive study of the competitive landscape, and their fit within their competition.
Startups should choose an area which is niche, and in a market which is scalable, up coming, and is one of today’s attractive sectors. On the other hand, choosing a sector which has already become a ‘fad’, may lead potential investors to believe this is another ‘run of the mill’ startup, unless of course there is a clear differentiating factor. Being in an over-crowded space may not be too attractive for an investment.
It would help to look at some of the competing startups, their core competence vis-à-vis that of their own, and whether such competition has received early stage funding from VCs or high net individuals.
Startups should be willing to go through all the ups and downs, but continue to be resilient, and bounce back. They should be able to argue against and counter all negative feedback, whether from critics, potential investors or their prospect buyers, and have strong enough points to prove their stance, and passion. They shouldn’t be perturbed by any market changes or criticism of their venture. The important point startups would have to keep in mind, is to ‘NEVER GIVE UP’.
Do connect with Rahul here.