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Y Ramarao
Y Ramarao
CEO
Spark Capital Advisors, Chennai
About Me
Spark Capital Advisors, established in 2001, is a full-service, mid-market investment bank engaged primarily in providing corporate finance (read capital structuring and fund-raising solutions - whether through Capital Markets, PEs, VCs or Angels on the one hand - and domestic and cross-border M&A advisory on the other), institutional broking and wealth advisory services. We also have an infrastructure consulting arm that provides financial advisory services to road, power and port companies. While we have made early-stage investments and incubated companies for many years now, we forayed into this business in a formal manner only recently. We have a team of over 60 finance and investment professionals with offices in Chennai, Bangalore and Mumbai.
As an investment bank that assists companies access capital from PEs and VCs, we are well-positioned to understand how such financial investors evaluate an investment opportunity, what they look for in a promising idea & team and the kind of nuances involved in the entire fund-raising process from the standpoint of the company and the entrepreneur. This is what we believe, we bring to the table when we invest in a start-up. Besides this, we try to (a) provide inputs that help give definition to the start-up’s business model (b) drive a sense of pragmatism and bring about a balance between passion and market realism into business plans of the company and (c) serve as a critical sounding board to the founding team and the entrepreneur in their otherwise lonely journey; and (d) facilitating liquidity and/or exit events for stakeholders in the venture that helps monetize the wealth created.
We have worked closely with over 10 start-ups till date. Our experience has been extremely rewarding - both from a professional and a financial standpoint. Learning how an entrepreneur thinks, what keeps him awake at night and aligning our success with his has always been a fascinating journey.
3 Piece Advice
1.Build for sustainable cash flows (not for valuations)
2.Think twice before sacrificing profitability for growth (particularly medium-term profitability for short-term growth)
3.Start small but dream BIG!
If there are any other things we have not asked asked and you would like to share with other entrepreneurs, please do feel free to key in your thoughts.
2.Think twice before sacrificing profitability for growth (particularly medium-term profitability for short-term growth)
3.Start small but dream BIG!
If there are any other things we have not asked asked and you would like to share with other entrepreneurs, please do feel free to key in your thoughts.
Common Challenges Startups Face
Quite often we come across start-ups facing one or more of the following challenges –
(a)The classic ‘chicken or the egg’ dilemma, particularly when it comes to product development, hiring, marketing spend decisions, in the light of rationed resources
(b)Lack of evaluating risks and sensitivities to the Business Plan including price, market volatility and estimated time for product and ‘proof of business concept’ validation. Accordingly, the lack of factoring in underlying impacts on the startup’s finances and the need for a Plan B is not often considered
(c)While most entrepreneurs are technically quite competent and capable of managing the operational issues of running a business, sometimes they lack the financial savvy and ‘money sense’ to gauge commercial viability of an idea or sometimes just see where cash flows are headed in the short to medium term.
These challenges coupled with sometimes, the lack of ability to ‘connect the dots’ and position the business concept appropriately to all stakeholders, are the biggest hurdles entrepreneurs face when trying to access capital.
(a)The classic ‘chicken or the egg’ dilemma, particularly when it comes to product development, hiring, marketing spend decisions, in the light of rationed resources
(b)Lack of evaluating risks and sensitivities to the Business Plan including price, market volatility and estimated time for product and ‘proof of business concept’ validation. Accordingly, the lack of factoring in underlying impacts on the startup’s finances and the need for a Plan B is not often considered
(c)While most entrepreneurs are technically quite competent and capable of managing the operational issues of running a business, sometimes they lack the financial savvy and ‘money sense’ to gauge commercial viability of an idea or sometimes just see where cash flows are headed in the short to medium term.
These challenges coupled with sometimes, the lack of ability to ‘connect the dots’ and position the business concept appropriately to all stakeholders, are the biggest hurdles entrepreneurs face when trying to access capital.
My Advice If You are Starting Out
What many entrepreneurs typically fail to do when it comes to a Business Plan:
1.Peg the size of the addressable market of their product or offering, with existing credible examples and sources
2.Provide dispassionate, well-rounded perspectives/market & customer feedback which sometimes requires one to ‘read the writing on the wall’ and accept market realities
3.Build sensivities and plan for the ‘not impossible’ eventualities whether related to macro or micro factors, measuring ‘Beta’ and its effect on performance scenarios and preparing a Plan B
Positioning the story appropriately has many facets to it – but broadly – we try to (a) assess whether the addressable market is large enough (b) ascertain high-level comfort on proof of concept and credible market indicators on pricing, costs and profitability in the industry (c) stress-test the business model for scalability and (d) gauge the management team’s relevant experience and ability to handle the rigors of managing a business in the relevant sector
When you write your first business plan:
1.Be sure to cover ground on points (a) to (d) on positioning of the story and bring out the differentiating factors vis-à-vis other products or offerings in the marketplace
2.Keep it simple and tell it as you were, to a layman
3.Ideally, let the numbers tell the story
1.Peg the size of the addressable market of their product or offering, with existing credible examples and sources
2.Provide dispassionate, well-rounded perspectives/market & customer feedback which sometimes requires one to ‘read the writing on the wall’ and accept market realities
3.Build sensivities and plan for the ‘not impossible’ eventualities whether related to macro or micro factors, measuring ‘Beta’ and its effect on performance scenarios and preparing a Plan B
Positioning the story appropriately has many facets to it – but broadly – we try to (a) assess whether the addressable market is large enough (b) ascertain high-level comfort on proof of concept and credible market indicators on pricing, costs and profitability in the industry (c) stress-test the business model for scalability and (d) gauge the management team’s relevant experience and ability to handle the rigors of managing a business in the relevant sector
When you write your first business plan:
1.Be sure to cover ground on points (a) to (d) on positioning of the story and bring out the differentiating factors vis-à-vis other products or offerings in the marketplace
2.Keep it simple and tell it as you were, to a layman
3.Ideally, let the numbers tell the story