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Large law firms, big-ticket consultancies, including the 'big four', are stepping up efforts to tap the country's burgeoning start-up ecosystem. Moving beyond pro bono knowledge-sharing engagements and workshops, some are set to ramp up their involvement and investment in the nascent ecosystem that includes taking pro-active mentorship positions and even some equity exposure in select start-ups.
"It is important to support the ecosystem, and mentor and guide them in the road to become a unicorn," says Sanjay Aggarwal, partner and head of enterprise business, KPMG in India. Over the past twelve months, KPMG has worked with 200-odd start-ups across 15 cities. "We plan to grow this four times over the next year," says Aggarwal.
In a bid to widen customer base in the start-up ecosystem, some consultancies are devising customised programmes based on specific sector requirements - offered at 30 per cent to 60 per cent discount of what it may bill a big-ticket corporate client. These relate to helping start-ups grow business and scale of operations, devise go-to-market strategies, or build logistics and supply-chain infrastructure.
EY, one of the 'big four' audit-cum-consultancy firms, has a 120-strong team in India that caters specifically to business needs of the e-commerce sector. Udit Aggarwal, partner and head of EY's e-commerce vertical, says the firm plans to ramp up its global Accelerating Entrepreneurship progamme in India in the coming months. On the anvil is engaging with 10-15 start-ups, especially those in the pre-seed funding stage.
Through a match-making of sorts, EY would help them connect with a bigger company for six months of mentorship. One EY partner would take the role of a co-mentor to handhold them as they scale up.
Management consultancy major Accenture is adopting an indirect approach to engage with start-ups in the post investment phase. Working closely with private equity funds, hedge funds or big-ticket corporate houses, Accenture helps these blue-chip clients make the most out of their investment portfolio that increasingly includes start-ups.
"We advise start-ups how to effectively deploy the funds they have raised to scale up fast, following a specific mandate from a client," says Sanjay Dawar, managing director and lead for Accenture Strategy. This could be in the form of building their go-to-market strategy or grow the business multiple-fold by scaling their ability to take orders and deliver them. Accenture has been working closely with their clients to devise their entry strategy into the start-up ecosystem. This includes conducting due diligence exercise of prospective start-up candidates for investment.
Marquee law firms, too, are eyeing the start-up space. Cyril Amarchand Mangaldas, one of the biggest law firms in the country, has a dedicated team of corporate lawyers assisting and engaging with start-ups. "A dozen start-ups have benefited from our engagement over the past eight to 10 months," says Vandana Shroff, partner, Cyril Amarchand Mangaldas. She is quick to point out that though the general perception in the start-up ecosystem is that founders should minimise their legal burn, much of that advice may end up costing the founders more of legal fees in the long run. "In today's time, bigger law firms bring the experience, processes, technology, efficiency and responsiveness, which accelerates the growth trajectory of a new venture," says Shroff.
Another top bracket law firm, Nishith Desai Associates, has reaped the benefits of working closely with many start-ups when it opened its office in the Silicon Valley in 2001. "We grew up with many of the Silicon Valley start-ups," says Vaibhav Parikh, partner, Nishith Desai Associates, who heads the start-up vertical in the law firm.
Around half of the law firm's US clients come from the Silicon Valley. Under one of its programmes, it follows a deferred-fee strategy while offering services in the pre-seed fund stage. The credit offered could range anywhere from Rs 10 lakh to Rs 25 lakh, depending on the service required. Pay back for the services rendered takes place only at the time when the start-up raises its seed funds.
"If they are not in a position to pay back, we could take a token equity position of one per cent or less," says Parikh.
Even as they scale up their engagement with start-ups, consultancy majors, too, are careful to hedge their risks in an ecosystem known for high failure rate, and fewer successes. Says KPMG's Aggarwal: "We will not have a mass-market engagement programme but a hand-picked and curated group of start-ups based on their business fundamentals and potential to scale."
