Having spent a year with Ankur Capital – an angel impact fund and a start-up in its own right - I feel I have experienced both the publicized and unpublicized world of Impact Business in India. Through my role as pipeline analyst, I had personally evaluated over 400 start-ups, projects, ideas and proposals and had been faced with the prodigious challenge to pick the best.
Through this journey through the Indian Impact Business space, I have been able to work with the three main stakeholders of the space – the entrepreneurs, the incubators and the investors – and identify some of the main challenges facing all three. As the impact investment story continues to unfold, I feel each of these stakeholders will need to take concrete steps to address the issues.
First – the entrepreneurs. I have met with entrepreneurs who have developed ideas in sectors like education, healthcare, agriculture, energy, water and sanitation amongst many others. Entrepreneurs like these are set to revolutionize the way the Indian business landscape looks in the next 5-10 years.
These entrepreneurs come in all forms – from young students coding in their college dorm rooms to high-powered executives who have left their corner offices, rolled up their sleeves and committed to getting their hands dirty to better India. From urban India where suffering and poverty stick out like a sore thumb to the rural setting where there is still much undocumented suffering and poverty, these entrepreneurs are working to provide access to affordable goods and services with new, dynamic and innovative models. These entrepreneurs give of their time and put in much effort as they work to change the harsh realities they observe.
Now, the good news is that these entrepreneurs are not alone, and they have found an equally excited partner in the incubators, who want to help them along their journey to creating positive change. These incubators, though largely dominated by government-sponsored technology, have been able to nurture some breakthrough ideas that are changing the lives of many people around the country. India, unlike Kenya (my own country), has many incubators spread out across the country. Most states have either a government or a private incubator that strives to help entrepreneurs and connect them with investors.
Then, there are the investors. Different kinds of investors come in at different stages of a venture’s life and each brings their own key benefits. Ranging from individual angel investors to angel funds to venture capitalists, it is quite evident that there is a diverse breadth of investors and a holistic ecosystem developing around the space. Through different financial instruments, these investors provide a substantial amount of capital available to seed and grow ventures to mature organizations that will impact the lives of millions.
The role played by these three major stakeholders – entrepreneurs, incubators and investors - and the existence of other forums such as business plan competitions, accelerators, venture consultants and advisors speaks to a space that has high potential to develop. The impact space is ready to step out of the shadows and into the limelight and take its place at the table as a mode of solving challenges in society using both conventional and unconventional models adapted for the Base of Pyramid population.
For these stakeholders to reach their full potential, some corrective actions need to be taken.
For instance, entrepreneurs should largely work on developing and starting out operations and running pilots before looking for Angel and VC funding. Many entrepreneurs lose hope in their venture pursuits due to rejection of their ideas by financiers. It will always help to build a strong case when there is a prototype or a working implemented model of an idea before approaching the investor. Entrepreneurs should also study the market, community and environment they want to transform and come up with problem statements and actionable learnings to support their venture ideas.
Incubators and accelerators should engage more with entrepreneurs to help them develop their business models and run pilots. Incubators should not necessarily worry too much about preparing entrepreneurs for investors, since a strong model itself will attract investment.
As for investors, I feel the risk tolerance levels are too low to actually seed and support worthwhile ventures that are still diamonds in the rough and convert them into polished and precious gems. There is a risk to investing in these young enterprises, of course, but the promise of both scalability and social impact should be a driving motive for many financiers looking to develop local communities, the domestic economy and make a return over time.
If these issues for the entrepreneurs, incubators and investors are addressed, then I expect the Impact space to grow rapidly. In the not so distant future, the lives reached and income generated will finally put to rest the question whether money can really be made when addressing society’s challenges.