Sahil Anand (Cedar IBSi Capital) on the massive B2B Fintech opportunity
Sahil Anand, founder and managing partner of Cedar IBSi Capital, shares his inspiring journey through the world of entrepreneurship, detailing the evolution of Cedar Consulting and the establishment of Cedar IBSi Capital. Learn about unique challenges and triumphs faced while navigating the consulting landscape and launching a focused fintech investment fund.
Check out the video of the conversation here or read on for insights.
🌱 The Roots of Cedar Consulting
Cedar Consulting has a rich legacy that traces back to the early 1990s, rooted in a family-owned business model that is quite rare in the consulting world. Founded by Sahil Anand's father, Cedar emerged as one of the pioneering consulting practices in India, at a time when the concept of consulting was still taking its first steps in the country.
"Cedar Consulting is actually the legacy business. We're probably one out of, maybe, like ten family-owned management consulting businesses in the world."
Initially, the firm operated under the banner of Renaissance Worldwide providing a wide range of advisory services, from private equity to strategy design. This eclectic mix in the early years helped establish Cedar as a versatile player in the consulting space.
🌍 Transitioning to Consulting in India
When Sahil's father relocated from the U.S. to India in the early '90s, he established one of the region's first consulting practices. The transition was not just geographical but also cultural.
"Consulting was still kind of a new phenomenon in this part of the world."
This challenge became an opportunity, allowing Cedar to carve out its niche in the nascent Indian consulting landscape.
📊 The Balanced Scorecard: A Unique Approach
One of the cornerstones of Cedar's consulting methodology is the Balanced Scorecard, a performance management framework that helps organizations translate their strategic objectives into measurable outcomes.
"The Balanced Scorecard is basically a very detailed performance management framework that breaks up the strategy of any business into a sort of a Google map."
This framework allows Cedar to work closely with clients, ensuring that all key performance indicators (KPIs) are aligned with the broader business goals. By integrating multiple dimensions—financial, customer, product, and organizational goals—Cedar provides a comprehensive roadmap for performance enhancement.
⚙️ Execution-Heavy Consulting: Making Strategy Work
Unlike many traditional consulting firms that focus primarily on strategy design, Cedar prides itself on its execution-heavy approach.
"Cedar's tagline is 'we make strategy work' because a lot of Cedar's work is actually execution heavy."
This means that Cedar doesn’t just hand over a strategy and walk away; instead, they stick with clients through the implementation process, ensuring that strategies translate into tangible results.
🏢 Consulting Landscape: Competing with the Giants
The consulting industry is dominated by several large players, often referred to as the "MBB" firms—McKinsey, BCG, and Bain.
"We compete with McKinsey, BCG, Bain. It's hard to beat them, but we also win regularly."
Cedar’s ability to compete lies in its deep expertise in specific sectors, particularly financial services. About 80% of Cedar's practice has shifted to focus on this area, enabling them to build a robust portfolio of clients and projects.
💼 Shifting Focus to Financial Services
As the consulting landscape evolved, Cedar recognized the growing demand for specialized consulting in financial services.
"Globally, about sixty percent of management consulting is in financial services."
This strategic pivot allowed Cedar to leverage its expertise, working with numerous banks and financial institutions across Asia, Europe, and the Middle East. The firm has executed large-scale business transformations and tech strategies for various financial entities, solidifying its reputation in this space.
🚀 The Birth of IBS Intelligence
In 2015, Cedar took a significant step by acquiring IBS Intelligence, a UK-based research firm specializing in fintech and bank tech. This acquisition provided Cedar with invaluable insights and resources.
"Now, we have the consulting piece, which advises banks, and the research business that advises fintechs or tech companies."
This dual approach not only enhances Cedar’s offerings but also positions it uniquely within the consulting landscape, where few firms own both consulting and research capabilities.
🚧 Challenges in Serving Startups vs. SMEs
While Cedar has a strong foothold in the corporate sector, serving startups presents unique challenges.
"The economics just doesn't make sense for startups still in their infancy."
Startups often lack the budget to engage in traditional consulting services, which can be prohibitively expensive. However, Cedar finds more success with small and medium-sized enterprises (SMEs), which can afford to invest in consulting to drive growth and transformation.
📈 The Growth Model of Consulting Firms
Growth in consulting firms often hinges on the ability to attract and retain top talent. Sahil explains the dynamics of scaling a consulting practice.
"The biggest lever is people because, the more partners you have, the more work you sell."
This model emphasizes the importance of building a strong team of partners and consultants who can drive business development and client engagement. As firms expand into new markets, it typically takes several years for new offices to become fully operational and profitable.
💰 Revenue Insights of Cedar Consulting
Cedar Consulting has experienced remarkable growth, driven by its strategic focus on financial services. With approximately 250 consultants spread across major cities like Bombay, Bangalore, Cairo, Dubai, London, and New York, the firm undertakes around 200 to 300 mandates annually.
"My dad built a practice that had a lot of dollar revenue because he realized early on that the Indian market wasn't gonna pay."
This foresight allowed Cedar to establish a robust Middle East practice, significantly hedging against the fluctuations in the Indian market. Today, Cedar's revenue is predominantly sourced from international clients, primarily in the Middle East, which has proven to be more lucrative than domestic engagements.
🌉 The Fintech Lab: Bridging Gaps in the Ecosystem
Founded in 2017, the Fintech Lab serves as an innovative platform connecting technology vendors with potential buyers, primarily CTOs and decision-makers in financial institutions.
"We realized that we have access to all the buyers of tech and all the vendors. There aren't many ecosystems that introduce them to each other in an unbiased way."
Over the years, the lab has nurtured approximately 52 B2B fintechs, providing them with the necessary tools and insights to thrive in a competitive landscape. Membership fees, which range from $10,000 to $40,000 annually, vary based on revenue, making it accessible for startups while still catering to larger firms.
🚀 Launching the Fintech Fund: Cedar IBSi Capital
The launch of Cedar IBSi Capital marks a significant milestone in Cedar's journey. Recognizing a gap in the market for B2B fintech investors, Sahil was determined to create a fund that leverages Cedar's extensive domain expertise.
"We realized that we have this great domain expertise and potential opportunity to invest in early-stage fintech companies."
The fund targets a size of $30 million, aiming to build a portfolio of 10 to 15 companies over the next four to five years. The investment strategy focuses on companies generating revenue, specifically those with $500,000 to $1 million in annual revenue, allowing for a strategic entry point into the investment landscape.
🔮 The Future of Fintech in India
The future of fintech in India is bright, with a growing recognition of the importance of B2B solutions.
"India has been the IT and software hub of the world for many years."
This foundation, combined with the rising demand for efficient banking solutions, sets the stage for fintech innovation. The market potential is immense, with estimates suggesting that the global B2B fintech market could reach $40 to $70 billion.
📈 Valuation Metrics for B2B Fintech Companies
Valuation in the B2B fintech space varies significantly based on growth metrics and market conditions. Sahil notes that SaaS companies typically command revenue multiples of 12x to 18x, with potential to reach as high as 24x or 26x for high-performing firms.
"If I end up with all the companies worth at least $100 million, that would be a good outcome."
This perspective illustrates the significant upside potential for investors willing to engage in this burgeoning sector.
🧭 Navigating the Competitive Landscape for Deals
In a competitive investment climate, Cedar leverages its established brand and extensive network to gain access to high-quality deals.
"We have a prop deal flow, and the fintech lab has passed us many quality leads."
This unique positioning enables Cedar to attract promising startups that may not be on the radar of other investors, allowing them to build a diverse and lucrative portfolio.
📚 The Importance of Education in Fundraising
Educating potential investors about the nuances of B2B fintech is a crucial part of Cedar's fundraising strategy.
"Half my pitching is really education. People don't grasp it immediately."
This educational approach helps demystify the sector, ensuring that investors understand its potential and the unique value proposition Cedar brings to the table.
🌱 Building a Sustainable Investment Model
Cedar is committed to establishing a sustainable investment model that not only focuses on financial returns but also adds strategic value to its portfolio companies.
"We know how to do due diligence on these companies and their use cases."
This hands-on approach ensures that Cedar's investments are not merely financial transactions but partnerships aimed at fostering growth and innovation in the fintech space.
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