A Cost Effective Investment Bank for Start-ups?
The other day I met for coffee with Nitin Khanna. I was referred to Nitin by a few people around Portland who had gotten to know him over the past few months. Nitin and his brother, Karan, were the founders of Saber Corp. – a very under-the-radar Portland company that had phenomenal growth over the span of a couple of years before being sold to EDS for almost half a billion dollars – yes, that was with a “b”.
In the course of selling Saber, Nitin was exposed to the value that an investment bank can provide. Not having gone through the process of before, he relied heavily on his banker to derive maximum value out of the deal and he tells me that if not for his banker, he probably would have sold the company for half of the ultimate purchase price.
After the sale, Nitin bought MergerTech and now runs it along with his brother and his executive management team. The concept is great and simple: Find great investment bankers all over the world who have expertise and experience but who would rather not spend 24x7x365 on the road or dealing with the politics of climbing the corporate ladder at a large institutional bank such as Goldman Sachs. He has established a cadre of these bankers and through their collective networks they have developed a database of several thousand companies that have shown some interest in being introduced to smaller technology companies (e.g. $3m-$50m) for a potential acquisition. His model is such that MergerTech can focus on companies that the larger banks overlook and can provide their services at rates that are very competitive.
I love the idea.
Much of what he is doing on the investment banking side is what we are trying to do at Alto – provide quality advice, guidance and services to smaller technology companies in a cost-effective manner. I see a real need for these types of services for the market he is targeting. Many of the start-ups with whom we work will be seeking an exit at some point. The ability to leverage an investment bank to not only find buyers but to also create a bidding process and negotiate the deal will be key for maximizing the value of the exit. My guess is that Nitin and his team will have no shortage of work coming their way.