Last year, while ecommerce took center-stage, venture capitalists also went off the beaten track. Dairy services and affordable dental care featured among some of the offbeat VC bets in 2011.
Venture capital investments in India, despite the country’s diversity, still largely remain within the confines of the Internet and technology sectors. The over $357 million invested by such investors in ecommerce startups alone this year is evidence. It isn’t unnatural, given that sectors such as technology and the Internet offer investors the ability to put relatively small amounts of capital to work in businesses that have the potential to scale in a non-linear fashion. Non-linear returns are after all the bedrock of the venture capital business.
But, India offers several businesses outside these sought-after sectors that can also deliver the kind of meteoric returns that venture capitalists seek. Over the years, we’ve even seen several mainstream venture capitalists make offbeat bets. At Startupcentral, while keeping an eye on startups in technology and the Internet, we’ve always held a clear bias for entrepreneurs building businesses around healthcare, education, cleantech and agriculture/rural needs.
Out of the 129 deals done by venture capitalists in 2011, 30 were from these sectors. We picked four interesting ones to showcase.
Milk Mantra Dairy: Ethical Dairy Farming
Gop, a nondescript town about 8 kilometers from Odisha’s famed Konark temple, is probably an unlikely place to find state-of-the-art German engineering at work. That changed 17 months ago when former Tata Group executive Srikumar Misra decided to install a 50,000-liters-per-day dairy processing plant for his company Milk Mantra Dairy. The plant sources milk from 2,500 villages in Odisha’s Puri district, where Gop is situated. It is then processed at the plant to produce milk and paneer (cottage cheese), packaged and delivered. German firm Multivac provides the technology for packaging paneer. In October, the Bhubaneswar-based company rolled out its retail brand Milky Moo and now reportedly clocks annual revenues of over Rs 5 crore (approximately $1 million).
Misra, whose last job was leading mergers and acquisitions at Tata Global Beverages (formerly Tata Tea) in London, teamed up with Ashit Mahapatra, former CEO of Dhanei Kshetriya Gramin Financial Services, to launch Milk Mantra in August 2009. In February last year, the company raised $5 million part-equity, part-debt Series A funds from Aavishkaar, individual angel investors and IDBI Bank. The funds have largely been used to set up the processing plant and the supply chain, which includes bulk coolers manufactured by Swedish firm DeLaval.
Misra and Mahapatra have their eye on underserved Tier II and III towns, a growing segment in the estimated $40 billion dairy market in India. But, what sets Milk Mantra apart from peers, both in the organized and unorganized sector, is its social impact. It has developed something called the Ethical Milk Sourcing Programme, which ensures that dairy farmers get a fair price for their produce every time they sell to Milk Mantra. The company also engages with farmers on issues such as cattle health and hygienic milk extraction through the programme. This helps the company to procure better quality of milk in a sustainable manner. The company’s medium term growth plans include rolling out operations in other parts of the country, including processing plants in Kolkata, Bangalore and Hyderabad.
(Image Courtesy: Milk Mantra)
Teach For India: Equality in Education
After announcing his decision to step down from ChrysCapital, the private equity firm he founded over a decade ago, Ashish Dhawan has chosen education as his new calling. One of his first associations with the sector is Mumbai-based not-for-profit Teach For India, an initiative that seeks to adapt the Teach For America model to deliver quality education to low-income schools in the country.
Teach To Lead, a not-for-profit organization founded in 2008 by CEO Shaheen Mistri, who is also the founder of non-profit Akanksha Foundation, is rolling out this unique initiative. The organization recruits outstanding graduates and young professionals to teach in low-income schools for two years. Recruited as Teach For India Fellows, these individuals are run through a training schedule for classroom teaching, which starts prior to the Fellowship period. The first batch of Fellows was placed in schools in Mumbai and Pune in 2009. The initiative aims to provide low-income schools access to better teachers and, in turn reduce the number of student dropouts – one out of three children who start primary school drop out before reaching the fifth grade, it says.
In December, venture capital investor Omidyar Network, which is backed by eBay founder Pierre Omidyar, invested $2.5 million in Teach For India. Omidyar, apart from making investments in for-profit companies, also invests in non-profits through grants.
(Image Courtesy: Teach For India)
MyDentist: Honest Dental Care
Affordable and high-quality healthcare has achieved validity as a business model over the past few years, largely because of the success of the well-documented Vaatsalya experiment. Last year, Vikram Vora, founder of Mumbai-based MyDentist, decided to apply the same principle to dental care. The idea to set up affordable dental clinics for middle class consumers came out of Vora’s observations while selling dental products to clinics for Healix Medico, his family business. “I would see dentists charging arbitrary rates, sometimes simply based on how much they thought a patient could afford,” Vora told us a year ago when he was just starting up. Today MyDentist is the only dental chain in Mumbai, and possibly in India, that offers a standardized and published rate card at its clinics – it is also available on the company’s website.
From four clinics last June, the company now has seven in Mumbai and reportedly plans to expand to 50 this year. It is also looking at taking MyDentist to Pune and up north. The clinics are no-fuss affairs – we visited the one at Irla in Vile Parle West for a consultation that cost Rs 50 – but the equipment is state-of-art. Most of the dentists who operate at the clinics are relatively young and usually women. It is a conscious strategy aimed at giving younger dentists, who would otherwise be assisting senior colleagues, an opportunity to hit the field sooner. Dentists are employed on a monthly salary basis, instead of the usual profit-sharing model, and work in shifts. These aspects, claims the company, help make the process of going to the dentist smoother and transparent. The company also frequently conducts dental camps at various locations to make its services more accessible to consumers.
MyDentist raised seed funding around June last year when it became the second startup to be incubated at Mumbai-based specialist seed stage investor Seedfund’s incubator. Though it did not use the physical incubator premises provided by Seedfund, the business model was fashioned from scratch with the help of the Seedfund team. The venture capital investor started MyDentist off with an initial $200,000 and has committed up to $2 million as the company grows. Like Vaatsalya, this one looks like another winner from the Seedfund camp.
(Image Courtesy: My Dentist)
Duron Energy: Off-the-Shelf Power Grid
Bangalore-based solar power systems startup Duron Energy was born in Pasadena, California, at the Idealab incubator in early 2008. California Institute of Technology graduate John Howard teamed up with Idealabs and former McKinsey & Co executive Amit Shah to develop a solar-powered device that could provide affordable and reliable electricity to rural consumers. The company launched its first product – Duron solar home power system – about two years ago for the Indian market and the founders relocated with the company to Bangalore.
The off-the-shelf home kit includes a five-watt solar panel, three LED wide-angle lights, a mobile phone charger, an AC grid charger and comes with dual brightness settings. On a full day charge, the system can generate ten hours of dim lighting and three hours of bright lighting. Each unit costs roughly Rs 6,000 per unit (approximately $113). According to the company’s website, so far it has touched 10,697 people and provided 172,500 hours of bright light.
Initially funded by Idealab (the amount was undisclosed), Duron raised another undisclosed round of funding from Intel Capital last September. The investment was announced as part of a $20 million infusion by the venture capital firm in six Indian companies. The stage of investment has not been disclosed. CEO Ajay Awasthi, who earlier led CDMA and data products operations at Reliance Communications, leads the company’s senior management team.
(Image Courtesy: Duron Energy)
In India, the firm has emerged as a significant investor over the past couple of years since it set up direct investment operations here in 2006. It has invested over $150 million here so far, which has come primarily from the $650 million eighth fund. “In Canaan VIII, we have committed about $100 million to companies in India,” Alok Mittal, managing director at Canaan Partners India told StartupCentral via email. Last year, the firm invested approximately $40-50 million, including new and follow-on deals. Its largest deal from the year was a $45 million Series A round in Bangalore-based software services outsourcing firm 
