The majority acquisition of Flipkart by Walmart and the size of the transaction is a more than clear indicator of the disruption that bricks and mortar companies are facing from the digital economy and the need for companies with dramatically different business models to collaborate to beat the competition.
Taking advantage of disruptions within and outside your company – Organic Vs Inorganic Growth:
Long-term earnings growth is the primary determinant of shareholder wealth. Global corporations work on improving earnings growth at all times quarter by quarter year on year. It is usually achieved by organically increasing capacity, adding new products or improving efficiencies. This is what is called Organic Growth. At times when these avenues have been exhausted and when industries are under very dramatic changes such as we notice now when their very survival is at stake, companies have to look externally to improve their longevity and earnings growth. This can be achieved by M&A, JVs, Diversification and Collaborations.
Corporate development – What Do They Do
Realising the importance of this activity, Global corporations have long set up large corporate development teams who help the company to continuously scan the environment and look for opportunities for inorganic growth. With the rapid disruption of businesses due to technology changes, the importance of this increased dramatically. The team also executes these using internal and external consultants and agencies. While this has significant fixed cost implications for these companies, none can afford not to have them.
Why startups need Corporate Development?
Startups have to grow-up to become global corporations in a very short period of time if they have to succeed. In the age of disruption, where you don’t know where your next competitor is going come from, creating value for customers and retaining them is a difficult task.
Consequently, more than ever before they have to think and act like global corporations and have corporate development as a key part of their arsenal in the constant endeavour to woo their customers.
Of course, with limited resources and management bandwidth, most start-ups end up neglecting this core activity and many end up being getting ‘disrupted’ themselves in a market they were trying to disrupt. It’s estimated that more than 1 out of 10 start-ups get out-competed in the marketplace.
This apart, fundraising as can be seen from the Flipkart transaction is also a key activity for startups often a constant one along with corporate development. It is estimated that almost 30% of startup failure can be attributed to failure to raise cash. This too is most often ignored until the company is fund-starved leading to failure.
What can a startup do?
Few startups can afford to have a full-time team member for corporate development and fundraising. The only other alternative is to appoint an external agency for fund raise or spend huge management bandwidth for this expensive but necessary activity.
Even with an external agency, the start-ups spend a significant amount of time explaining their business before they can start this activity.
Enter LA Corporate Development Desk:
Lead Angels is a pan-India Angel Network, started by a team of three originally from IIT Bombay to professionally develop angel investing in India by applying best practices of early stage investing backed by an experienced team, savvy investors and a network of relationships and partnerships in the Indian startup ecosystem. Its portfolio of 21 companies has shown remarkable resilience and success in raising external funding in a turbulent environment and boasts of an above industry average survival rate.
Realizing the critical nature for a full time corporate development activity for its investee companies that will add value to both startups and its investor members, LA has taken the initiative to set up the first corporate development desk for its portfolio companies. Among the activities it undertakes is fund raising, M&A and corporate partnerships.
It leverages the strength of its members, team, the relationships and universe of portfolio to initiate and execute corporate development activities. Team is mix of investment banking and portfolio management professionals.
The corporate development team does not limit itself to the portfolio alone and is constantly scanning the environment for opportunities and is externally oriented. The activity is conducted professionally within timelines and service level agreements and not as freebie extended to portfolio.
Most such corporate development activities are confidential in nature and cannot be shared here. If you want to know more about LA Corporate Development services please write to email@example.com.