Shubhumoy Ray

MD & CEO, Finnacle Capital Advisors

New Delhi

About Me

have you helped young startups raise capital? You could also share some of the startups you have helped. How has been your experience? Finnacle Capital Advisors (www.finnaclecapital.com) was formed as a boutique, infrastructure advisory outfit in 2007 with a vision to extend fully integrated support and services to developers of energy and infrastructure projects in South Asia. Today, we are a niche, management owned investment banking group with offices in New Delhi, Hyderabad and Kolkata, and affiliate relations in Sydney, London and New York. We offer independent advice in project development, counterparty contracting, capital structuring and raising of debt and equity capital for investors and project developers in resource, energy and infrastructure sector. The management team has collective career experience of having worked on projects cumulating over US $100 billion in transaction value globally, across technology and functions, ranging from project development, engineering and supervision, transaction structuring and raising of project financing capital. We work closely with several global private equities and utility groups as well as leading banks, financial institutions, ECAs and multilateral financing agencies in India and abroad, thus having access to large and diverse sources of debt and equity capital targeted at energy generation projects. The firm is officially empanelled with The World Bank Group as an energy sector consultant. Our Board is strongly represented by very senior bankers and private equity professionals, who lend us not only the vast resource of their domestic and global experience and expertise in the sector, but also access to senior counterparties in funding organisations through their highest level of personal network. Personally, I have been in this business for over 16 years and have worked with a number of start-ups in India and abroad in food processing, renewable energy, technology, services and media industries. The experience in working with a start-up is always very exciting if there is a strong business plan and management team. The enthusiasm of the management team can often be infectious and can lead to some radical strategic directions through combined brain storming efforts.

Common Challenges Startups Face

We have often seen start-ups either failing to raise initial capital or failing to sustain operations after a few years. In most cases, particularly if capital and working capital expenditures are front loaded in respect of investment in office, brand, equipment and technology, the business will follow a classical J-curve. It is important to have enough capital support when the bottom is reached in first 2-3 years. Therefore, conservative budgeting and prudent financial planning is an absolute necessity. Other key success factors like in the business plan and revenue model, and the experience and capability of the management team in delivering the goods. Typically, launching a “me-too” product without clear lines of differentiation and positioning can be dangerous for a start-up and brand building for market penetration can eat into a lot of initial capital.

My Advice If You are Starting Out

It’s most important to be honest and realistic. The business plan needs to clearly lay down the end-to-end cash cycle and present a clear positioning of the products or services vis-à-vis the market and competition. A lot of start-ups in South Asia are built around the dreams of a single promoter. So, even while the product or service concept is unique and novel, a number of business plans fail to raise capital because of weakness in implementation strategy, management bandwidth and long term sustenance. Therefore, we would suggest any start-up seeking our help for raising capital to think in a focused manner from the perspective of the investor and start by answering in all honesty, how the investor gets his capital back. And then, justify that hypothesis by laying down a practically exercisable and sustainable implementation plan, backed by compelling management credentials and a broad-based delivery team.

Metrics that Validate a Startup

The start-ups which are most liked by VCs are those which present a pioneering concept as an early mover and can rapidly build entry barriers for “me-too” followers. While the numbers and benchmarks will widely vary across industry and product-service combination, the thumb-rule for a VC is to make exit at a minimum of 30% IRR. In order to achieve that, the business should realistically return 3X the initial investments in 3rd year or 5X, in 5th year.

3 Piece Advice

Be practical
Be honest and
Look at the most minute details