Finlatics Investment Banking Experience Program - Project 1

1. I think a powerful profile idea combination would be A (Engineer with an

MBA degree and previous experience of working in Information
Technology) and C (an international transfer remittance software).
Today, as the world becomes more and more international and with
many people working and studying abroad, there has been a prominent
increase in remittances made by foreign workers to family members in
their home countries. The most common way of making a remittance is
by using an electronic payment system through a bank or a money
transfer service. But banks charge high amounts for relatively simple
transfer processes. So there has been an increasing need for a
competent, security- proof and sound international transfer remittance
system.

Over the past few years, a wave of fintech start-ups has emerged in India
and all over the world. They want to move financial services away from
the “old world of banking” with new technology. An advantage fintech
start-ups have over big banks is that they can concentrate on a small
market sector, with a better understanding of how to use technology.

Building the international remittance system is the stepping stone for

Arjun’s startup. It’s major advantage would be that it will offer significantly
cheaper, faster and more transparent money transfers than banks and
other financial service platforms.

An average idea can be transformed into a revolutionary one with the

right development team to make it real. As Arjun has no prior experience
in financing he would need to hire a competent team who can aid him
with the entire development process. With experienced members he can
fill the possible knowledge gap that may be present. Therefore, with the
advantage of his educational qualifications and work experience
combined with the expertise of his team, he can build a lucrative system.
As he is an engineer and has previously worked in Informational
Technology, he can build a technology that bypasses the traditional
international bank payments system and directly matches consumers
and companies in different countries who want the opposite currency.
The management skills gleaned from MBA program can help him to
revolutionize the banking and financial services sectors.
 The world of financial services is in a period of rapid change, and as we
all know it needs to continue to evolve further – financially and in
reputation. Therefore, building an international remittance app is no
cakewalk. The FinTech Regulatory framework keeps evolving and
processing the heavy documentation requires diligence and
organizational skills. An international remittance system will require
constant monitoring of regulatory frameworks of various countries and
combining financial knowledge with his technical skills and this can be
done efficiently with the help of his management skills and a well hired
team. Alongside this, as Arjun has worked in IT he will be familiarized
with various compliance regulations required and the documentation
process to be completed. However, Arjun’s challenges are not limited to
just this. The more the fintech market grows, the more the regulators
want to have control over the services provided by them. This can delay
the go-to-market phase for the startup. Only an entrepreneur who is
passionate enough about his idea will be able to stand by and wait out
this burdensome process.

A similar story can be seen of Ashneer Grover, MD and founder of

BharatPe. He is a civil engineer and an MBA in finance. He was
previously the Head of New Business at PCJ, helped build Grofers,
headed Corporate Development for American Express India, and was in
Kotak Investment Banking. He is now running BharatPe, an
Indian fintech company that caters to small merchants and kirana
store owners in India. His deep understanding of consumer behaviour
has helped him accelerate his business and placed him as one of the top
investors in India. This sparks hope for Arjun, as he has similar
educational qualifications and startup idea.

All in all, I believe Arjun’s love for his idea combined with his education
qualifications and work experience can help him turn his breakthrough
idea into a solid tangible product.

2. Unlike loans, private equity offers more than just capital to firms. It is a
clear value addition to the company through several other variables
such as stamp of quality, network driven benefits and advisory benefits.
Given the chosen profile-idea combination, I believe Arjun’s primary
focus should be on networking and advisory benefits.
Arjun can fill his financial and accounting knowledge gap using various
sources available online and with help of his team but he evidently
lacks experience. Having an investor, who is also a mentor with certain
experience in the same industry can help Arjun scale up his startup. A
mentor can help him navigate the turbulent waters of the fintech startup
with hard knowledge. This may consist of payment statistics, ensuring
compliance and security, building user management models, legal
matters amongst others. Besides the development of the product, the
mentor can also help with currency hedging. An international
remittance app is prone to currency exchange risk and in order to
protect its position, the company must strategically set up investments
that can offset potential losses. With the help of an experienced
mentor, Arjun can learn various approaches that can be used to
mitigate this risk.

Moreover, Arjun can benefit from the already established networks and
relationships of the investor. These connections are golden. The right
connections can give Arjun what he needs to develop his business and
make it a success, and the investor can put him in touch with such
people. Their past success in business is likely to have led to a
collection of strong contacts, some of which could be a benefit to Arjun.
Their decision to invest in his business can also show how much they
believe in his company and want it to be a success, which makes them
more likely to be happy to pass on some of their top contacts for him to
meet and build business relationships with. This could include
consultants to help launch and market the remittance system or service
providers to fill specific skill and talent gaps.

Hence, Arjun’s optimum PE Investor would be an individual with

experience in this domain and can act as a mentor to him, by imparting
his knowledge and connections as the nature of the domain is quite
complex and this is the reason advisory and network driven benefits
are most important for Arjun.