Sachindra Rudra signed up with Acumen Fund in September to lead the non-profit venture capital firm’s investment activities in India. Prior to his latest assignment, the IIM Ahmedabad alumnus was director of India operations at private equity firm Navis Capital, and also worked for several years across companies such as Piramal Healthcare, Unilever and McKinsey & Co. Acumen Fund has invested more than $75 million globally across 69 companies. It started investing in India in 2006 and has so far invested over $30 million in 28 social enterprises here. Some of the companies in its portfolio include Husk Power Systems, Hippocampus Learning Centers, LifeSpring, WaterHealth and D.Light Design. In an email interview with StartupCentral, Rudra touches on Acumen’s experiences with social investing in India so far and what lies ahead for the firm. Edited excerpts:
How active is Acumen in India as a seed stage investor? Will you become more active in that space? If not, why?
We are actually not active at the ‘seed’ stage, but rather are interested in companies in their early stages of growth. I’m sharing a report called ‘From Blueprint to Scale’ that talks about the different stages of growth in a social enterprise, and the various kinds of capital required for it. The report was co-authored by us and Monitor Inclusive Markets.
As a social and early stage investor, have you found support easily from mainstream venture capital investors for later stage rounds?
We think a crucial part about the work we do is collaboration. Whether it’s with traditional investors or other organizations in the sector, at conferences or forums, we always encourage conversation and interaction, and learning from each other. As most institutions in this sector will attest, a lot of the work that we achieve is built on sharing and collaboration.
How do you assess the performance of the India portfolio, both in terms of monetary and social impact terms?
I cannot provide specifics on our returns but as Acumen’s largest portfolio, it’s incredible to see the impact that has been achieved in India. We have almost $30 million total approved in 28 companies and have over four times in external capital raised for these Indian investees and has impacted over 11 million individuals.
What is your essential checklist when you evaluate companies for investment?
We invest in health, agriculture, energy, water and sanitation, and education and globally we also invest in housing. The primary investment criteria:
- Potential for significant social impact: Companies need to make a product or deliver a service that addresses a critical need at the bottom-of-the-pyramid in the areas of our strategic and geographic focus. Delivery of the products or services should generate social outputs that compares favourably with products or services either currently available on the market or through charitable distribution channels.
- Potential for financial sustainability: A clear business model that shows potential for financial sustainability within a five to seven year period, including the ability to cover operating expenses with operating revenues. This period corresponds to the tenure of most commercial loans, and positions entrepreneurs to access commercial finance in the future.
- Potential to achieve scale: An objective of reaching approximately one million end users within a five year period with the benefits of the product or service.
Do you expect to invest more or less in the next 12-15 months? Any exits coming up in the next 12-15 months?
Of course we expect to invest more in India over the next several months. We’re optimistic and constantly looking to find new innovative companies that are providing low income communities with services and products they otherwise lacked. Our team is always open to meeting interested social entrepreneurs and in fact we host an open house every first Monday of the month at our office in Bandra, Mumbai.
Are there any business models or best practices from India that you have been able to roll out in other markets?
- WaterHealth International has expanded into Ghana. They announced the ‘Safe Water for Africa’ (SWA) partnership for West Africa with Coke, Dieago and IFC to deliver water to 2 million Africans. They are also in the process of planning their expansion into Bangladesh.
- After investing to help d.light set up their office in India we’ve since supported the expansion of their operations into Tanzania. d.light products are now sold in 34 countries.
- Ziqitza Healthcare provided knowledge transfer and consultancy support to help the Aman Foundation (AF global Partners) set up an ambulance service in Karachi.
How easy of difficult is it to attract and retain talent for your operations here? What do you specifically look for when you recruit?
It is likely that talent is one of our biggest challenges, both in terms of finding the right entrepreneurs as well as members for our team. We set the bar really high, especially for our team. We expect talented professionals who have mainstream business skills but at the same time also have a drive and passion for social impact.
Based on Acumen’s experiences in India, what are the five key lessons you could share on social investing and working with social enterprises?
- Neither grants nor markets alone will solve the problems of poverty
- Great technology alone is not the answer
- Patient capital investing is built upon a system of values; is not a series of steps to be followed
Image credit: Acumen Fund Blog