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Archive for February, 2011

How to get acquired as a startup

February 19, 2011 Leave a comment

I love to speculate what the future will bring when this long recession is finally over. I do subscribe to the popular belief that there will be a new normal. Small business will rule. At the same time the big guys will go on an acquisition spree to play catch-up. Here are seven tips for startups planning to get acquired as their exit planning.

  1. Qualified and Passionate: The founders and leadership team should have a background that indicates not just capability but the ability to sustain ups and down.The casual and the un-passionate will not be able to face the “startup demons”.
  2. Be aware of the competition: Earth calling. Are we the only intelligent life on this universe? Others may be light years ahead. Either change course or do something to leap frog.
  3. Prove the model: Get paying customers and show that the business model works and is sustainable. This seems to be a standard litmus test for any potential investor or acquirer.
  4. Build Credibility: Have referencible customers and link up with well recognized partners. This is one part of assessing  barrier to new entrants.
  5. Get Noticed: Build a good online presence through a well laid out website and a social media marketing plan. When acquires come window shopping, they need to see an audit trail.
  6. Hit the milestones: Show a steady progress on your accomplishments. This is the second factor for building a barrier to new entrants. New entrants need to play catch up.
  7. Prove your uniqueness: Patents may not fully protect the IP but it gives instant credibility and gives investors a sense of assurance that a startup in on to something unique. The third barrier to entry factor.
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A unique strategy by a Digital Media PE fund

February 12, 2011 Leave a comment

Buyout PE funds are at an all time high since year 2005. Despite this, the amount of “dry powder” or unallocated committed capital in the buyout funds is above 50% for the last three years according to AARMCORP who track and benchmark PE funds . Too much money chasing not-so-plenty a deals.

Furthermore, a peer set comparison of buyout funds shows that funds under 500M in assets who are investing in Technology and Communications buyouts have reported less than 10% IRR in the last three years. Despite these two negative indicators, there is unabated interest in technology buyout funds due to the promise of high returns in a relatively short term.

The good news is that it can still happen. Provided, there is a capable management team with the right connections, a smart deal identification mechanism, a creative makeover process, and secured exit planning. Enter Michael Connolly and David Silver of Atlas Digital Media Opportunity Fund who have what it takes to take on the challenge in delivering the heady 40% IRR limited partners expect.

Their highly successful deals EldercareLink, BuyerZone, Big City Doctors, Med Trak Alert and Atehena East, has given them a rich ecosystem of deal selection expertise. They have already identified two Internet properties with interested buyers as suitable target firms. Zane Tarrence, an adviser to the Fund, maintains a large database of potential buyers and together with the Managing Partners who have relationships with both strategic and financial buyers; for example, QuinStreet, Internet Brands, The Health Central Network, and BankRate among many others. In all cases their criteria is to seek out fragmented private companies at a discount to their multiple much higher than what other private or financial buyers would pay.

Unlike other funds, Atlas Digital will examine potential investments with an emphasis on who the potential buyers of the portfolio company will likely be prior to the Fund acquiring a controlling interest so there is no delays in cashing out in a timely manner. The partners management consulting backgrounds has been instrumental in creating valuable “reusable know-how” from re-restructuring Internet property deals such as ElderCare Link and Big City Doctors.

Applying tried and tested methodologies to fix Internet properties gives them an edge over others who are failing to derive efficiencies in their asset management operations. This is a significant edge for Atlas over other funds of similar size. Not only are they able to make more deals but they can also manage them with a lower operating cost.

There are hundreds of Internet businesses with a value just below the transaction size threshold of what strategic buyers are looking to buy, leaving an opportunity for Atlas Digital to identify, acquire, restructure and exit by leveraging their connections, methodologies and pre-appointed exit deals. Email mic@atlasdigitalpartners.com for more information.

Both, Atlas Digital Partners and AARMCORP are past clients of ZENeSYS.

Connecting with leading B-Schools in India

February 9, 2011 Leave a comment

Our consulting skills certification program has attracted the attention of leading B-School students in India. In the last three years nearly 40% of a graduating class were snapped up by consulting firms. In some instances consulting intake has exceeded the traditional finance and marketing new hires.
Awareness about consulting as a career has jumped significantly on B-School campuses. Yet very few options are available for them to learn consulting skills. The opportunity to work on live consulting cases at ZENeSYS is a major draw.

Unlike other live cases on campuses,  ZENeSYS provides an entire life cycle consulting experience. They start with problem definition, creating the hypothesis, developing frameworks, conducting research and analysis/synthesis for the final recommendations. A unique experience for the participants.

To date interns from the following Institutions have worked on ZENeSYS projects:

  1. IIM-A
  2. IIM-B
  3. IIM-C
  4. IIM-L
  5. IIM-I
  6. IIFT
  7. SPJIMR
  8. SJMSOM
  9. NMIMS
  10. Symbiosis

Participants benefit by learning and applying tools and methods leading consultants use. A certificate, CV points, endorsements   and the sheer experience has put several ZENeSYS alumni in consulting jobs.  For ZENeSYS, the participants genuine desire to learn and demonstrate their analytical capabilities has created many happy clients. Some of our alumni are now returning to ZENeSYS as clients, creating a virtuous cycle.

What’s hot in India for business opportunities

February 5, 2011 Leave a comment

Since the 1990’s has created an image of “Outsourcing Nation” in the eyes of the West. This notion has blinkered the opportunity India presents itself as a consumer. Foreign Direct Investment (FDI) rose from $10B in 2005 to $40B to 2009. In year 2008 export from USA to India jumped 85% in just one year alone according to US Commerce Department.

Recent High Growth Sectors in India:

  1. Infrastructure: Real Estate, Automotive, Transportation, Nuclear and Alternative Energy
  2. Technology: IT product development, Business Process Outsourcing and Software Development
  3. Healthcare: Hospitals, Medical Insurance, and Biotechnology
  4. Education: Vocational Training, Schools, Universities, and Business Schools
  5. Retail: Organized Retail
  6. Food & Beverage: Packaged food and Alcohol

Some investment vehicles to consider are joint ventures or direct investment (several sectors are open for 100% ownership by foreign corporations. Franchising is taking on like wildfire with coffee chains, retail stores, hospitals, schools, white goods, eye wear, fashion accessories, garments, and fast food.

Entrepreneurship in the technology sector has proved to be a lucrative hunting ground for Private Equity investors. Several PE funds have been setup in the last three years looking for venture and buyout investments in technology, healthcare and biotechnology startups .

Saving ourselves from Analysis Paralysis

February 1, 2011 Leave a comment

Yesterday, we were working late into the night trying to figure out an approach for tackling a very unusual assignment. Unlike math problems. consulting problems  can take days or weeks – just figuring out an approach. Once an approach is created, its just a case of putting it t work.

We created a comprehensive set of initial hypothesis and conducted enough secondary research to figure out the main issues that we needed to tackle. Then came the challenge of how to get the answers for the selected issues. Several ideas on approach were considered but none seemed right or viable for one reason or another.

Those who are in consulting will know that this condition is known in the inner circles as “analysis paralysis”. “Let the solution come to you” are words in the McKinsey Way Book as an answer to this malady in a very serenely philosophical tone. But that can take some time.

Here is how we solve the analysis paralysis problem at ZENeSYS. We state the problem on our forums and let the crowds in our network of “smart thinkers” do the mulling on it. This morning the solution came in. It was brilliantly simple.

Sometimes, you just have to let the power of teamwork help you find a way out.

Crowdfunding Social Entreprenuers

February 1, 2011 Leave a comment

CARMa a social enterprise in India who are creating opportunities for the needy in rural India has entered a race to raise $8,000 to win an accelerator program at The Unreasonable Marketplace.  CARMa has made it into a shortlist of 45 who are in a race to convince that the crowds they have it in them to do what it takes to realize their vision. If the entrepreneurs can raise the target amount, Unreasonable Marketplace will put them in touch with well known venture firms such as The Acumen Fund and put them in contact with other sponsors for high growth potential.  Supporters will need to put their money where their mouse is. Another great example of tapping the power of crowds and this time, for funding, credibility and an expression of our sentiment.