Investment banking is a core element in helping companies, governments, and institutions with raising capital or providing advisory support through financial transactions. Professionals also need to gather a variety of other banking skills such as financial modeling, market analysis and negotiation expertise in order to successfully pursue this career. They also are important for assessing investments opportunities, supporting mergers and acquisitions and advising clients about strategic directions. This article will shed light on some of the vital roles with required skills for investment bankers and expertise necessary to stand out in this dynamic environment.

You can work as an investment banker provided you have all the essential competencies to be able to negotiate, and do financial modeling and market analysis effectively. These skills help professionals assess investment possibilities, guidance during complex financial transactions, and strategic decision-making. In this essay, we look at the core responsibilities of an investment banker and discuss key skills that one has to hold to prosper in this highly competitive sector.

What is Investment Banking All About?

Practically, it is nothing but representing a company, which requires funds or which is looking out for a strategic partner in front of an investor or buyer. This needs to be aptly strategized as both have strikingly opposite requirements. Financial investor is not much concerned about the business model, he is more focused on the return or yield he would generate when he exits. While strategic investors would be able to dive better as they would focus more on synergies with the target company. 

To become an effective investment banker, you need to know everything about the business model you are trying to sell or get investment in. Every meeting with a potential investor is an opportunity which you gained, therefore research well before you land up in a meeting. Sending a quick teaser before the meeting will make investors more learned and the discussions put forth will be more effective than otherwise. The better and crisp the teaser, the higher would be the potential interest of the investors. It is usually a 5-6 pager impactful presentation covering the USP of the company. There are several online tools available in the market to curate beautiful presentations. Therefore, it is not really important for an investment banker, especially the boutique ones to put in lots of effort in designing a teaser or pitchbook. The tools range from Spark Adobe, Canva, Visme, Zoho, and others.

1. Sharing The Pitchbook: 

Post receiving a positive response, you would be required to send a detailed pitchbook running into 40-50 slides which covers the company evolution, management background, technology details, clientele, peer group positioning (focus here on the vision of the founders), and other details. It is usually been experienced that investment banks create teasers and start circulating widely to all the investors, without focusing on the target investors. Additionally, at that point, the pitchbook is under progress. This is a No-No! It is highly important that as a professional you need to be ready with your pitchbook and financial model. Teaser is a by-product of the pitchbook and not vice versa.

2. Shortlist The Investors Wisely 

So as to save the time and effort. It is critical to duly understand the sector in which an investor is keen to invest. There are several forums to get connected with angel investors such as LetsVenture, Chandigarh Angels, Mumbai Angels Network, and Venture Catalyst, among others.

3. Realistic Financial Model: 

A financial model is not merely an Excel working, it is a platform to set future expectations of investors or buyers apart from diluting a stake. You could include some fancy numbers however everything boils down to how well you negotiate and present your case. 

Requisite Skills For Investment Bankers

Based on the practical experience and survey conducted by 50+ investment bankers, it is analyzed that qualification does not hold water in the current economy vis-a-vis experience. Whether you are a CFA, an MBA, a Graduate, or an IITian. All you should focus is an entry into the first door of an investment bank where you could work on live deals. You might have an impressive personality and confidence, however, it is extremely useful to know how to sell apart from understanding different business models. Following are the skills for investment bankers:

1. Good Drafting Skills

It is effective to use powerful words and frame a story while sending a pitchbook. It is of utmost importance to feel the need of the business model by deep diving into the company and getting all the required information for you to sell effectively. At the end of the day you cannot become an industry expert, however, all you need is to connect to an industry expert, who could further facilitate you in providing the right direction.

2. Build a Good Network And Reputation: 

An added advantage of entry into investment banking is it lets you build an extensive valuable network of investors as well as sector experts globally. Therefore, a tool here is to interact and make informal connections with these people. Let them recognize you as an individual and not as a part of the company. You may do this by sending texts on specific occasions or sending some of your social media articles and the most effective way is to call than text or email (as per research, a phone call is 6 times more effective than an email or text). 

3. Work-Life Balance: 

The flip side of working with top investment banks is a majority of them globally are making their employees work 18 hours every day, which in turn takes a toll on their personal lives.  You may opt to work for a boutique investment banks Vs bigger players.

To conclude the entire article, we have tried to share some effective and implementable tools to adopt in real life in order to crack that entry in an investment bank.

Also read a blog – Guide for Investment banker

Modern startup valuations often seem like an unsolvable mystery enshrined in gossip and bubble rumors. Startups looking to raise capital need an understanding of how valuations work. Essentially, a value is the amount of money an investor is willing to spend on your total company — but only after parsing it out from a few key components that have a major impact on investor psychology.

In this guide, we will discuss the main parameters underlying startup valuations and provide some of the pitfalls you should avoid in the course of fundraising. The article provides founders the basis to think strategically in pricing: from focusing on business growth factors towards understanding its valuation- which includes EBITDA multiples, comparable deals, or even asset valuations. Whether you are a first-time founder or getting ready to scale, the future success of your startup hinges on understanding the valuation game.

Understanding The Startup Valuations Game

There is a lot of noise around startup valuations. Let us highlight the greater aspects and what to take into consideration while raising funds. The valuation is the amount an investor is willing to pay for your entire business. The valuation will all come down to three broad aspects mentioned below. The aspects are provided indicative weightage as well to make you understand the psychology of an investor:  

It is being rightly said that investor invests in founders and not business models. Along with that, what actually makes the business valuable is mitigating the risk of the business failing in the future. It is hereby surveyed that 95% of the businesses fail in their first two years of incorporation. Therefore, it is extremely important to be mindful of 7 major mistakes to avoid when growing big and getting trapped in the valuation game:

• Diverting the vision of the business merely for getting investment from big investor
• Focusing on business than valuation number
• Keep personal connections with customers; valuation should not impact the core business
• Developing and streamlining processes and systems
• Don’t shy away from selling the business even when you reach at the top
• Reliance on the team too much; remember it is your dream; for employees, it’s a job
• Diversification in the industry; there are unexplored spaces across the globe to diversify business models

How Do I Value My Startup? 

The major methodology to value the startups

• EBITDA multiple – In the case of profit-generating companies, an investor applies an EBITDA multiple, usually in the range of 7-10x (depending on the size of the business), and multiplies it by the EBITDA. Additionally, there could also be a multiple of sales / Gross Merchandise Value (GMV) for larger fast-growing businesses. 
• Comparable Transaction Multiples– An investor might decide to list down all transactions in the near past and compute the multiples in comparable transactions. It is advisable to carry this method for a large set of comparable companies by grouping a wide range of business model.
• Asset valuation – In the case of capital-intensive business models, investors would like to value the underlying assets. The assets can be a database (for WhatsApp and database collating service business models), and traffic (for knowledge-sharing websites). The scoring shall also be done for the quality of such traffic, active and dormant users, a premium domain name (majorly in the developed countries), a recognizable brand name (social media marketing plays a critical role), and other things that can be leveraged to make higher profits and achieve a faster return on investment for the buyer.

Startups should keep in mind a couple of things while self-evaluating their businesses. Do not boast much of the things which you are not sure about. Analyse and assess in detail the industry size and where would you be positioned post-money in the industry. The best could be achieved, in case you could map the peer group on the scale for competition and USP.