In 2013, EY India realised that pulling out consultants from some of its verticals to counsel predominantly ecommerce ventures in the startup space won’t work. It needed a team that would understand the thoughts and problems of the young customers who approach it for help. EY named Udit Aggarwal, 35 years old at the time and one of its youngest partners, head of an ecommerce vertical created exclusively for India.
Today , EY has 120 consultants in this squad, who consult ecommerce players in financial services, retail, logistics, travel and IT.“Our teams consult PE players also on management changes and res tructuring,“ said Aggarwal. “Unlike other industries, here it is more result-driven because the startups and ecommerce firms are lower on manpower.“
Such consultants, known as `startup therapists’, aren’t new, at least in developed markets. They advise startup founders and managements on business models, hiring and training, laying down processes, putting IT and infrastructure in place as well as on fundraising and equity dilution. In the US, they charge up to $200 an hour and in the UK $300, said people in the know.
The service fee varies according to the time taken to complete a project -the time often ranges from four weeks to six months. It depends also on the number of senior partners, partners or associates involved and the complexity of the task. Demand for the ser vice is growing fast, as investors, both foreign and local, find potential in India’s startup world and are pumping in money. The new industry has seen more than $4 billion in investments in 2014 and the activity is expected to further pick up in 2015. Some early startups are meanwhile mulling public share sale.
“With increased number of deals and demands for IPO advisory, we have started flying in PwC consultants from the US and UK.Some of the entrepreneurs are very young and need a lot of help in direction,“ said Sandeep Ladda, India technology leader at PwC.
PwC has a two-year-old team with at least 50-70 consultants looking into IPO advisory, people and change management, among others. Competitor KPMG has different teams to work with startups during their different stages. In the initial stages, consulting services and tax advisory come into play, while later it is deal advisory.“We are connected through a lifecycle of the company,“ said Ashvin Vellody, partner, management consulting, at KPMG India. There are at least 125-150 people working on ecommerce projects at the firm.
While the established consultancies have mostly clients whose second or third round of funding is complete, there are niche players whose customers comprise fledgling startups who have finished their first round of funding, or even at an earlier stage.
“We work right from the business plan and chalk out the multiple stages of their business in the next 3-5 years. We had just 10 cases in 2013, 31 in 2014 and this year it should be much more,“ said Mathew Isac, director of Bengaluru-based VentureBean Consulting.
At times, they have to deal with confused entrepreneurs as well.Isac’s team is guiding a 23-year-old who is toying with the ideas of starting an automated customer service platform and an online confession app where darkest secrets get discussed anonymously.He was advised to go for the option that had better viability.
Another one has been sitting on an idea for the past six years but has yet to figure out its value proposition, said Isac. “Sometimes we have to tell them to go back to the mainstream and not everyone can become an entrepreneur,“ he added.