2013symposium_Intellecap

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© 2013 Intellecap. All rights reserved Social Enterprise Landscape in India Anurag Agrawal

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Transcript of 2013symposium_Intellecap

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Social Enterprise Landscape in IndiaAnurag Agrawal

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Social Enterprise Landscape in India

• India’s SEs are a young but ambitious industry - The industry took off in 2005-06 and has grown dramatically since then

• The majority of SEs are small, reflecting the industry’s youth, but not its potential

• Most SEs target the BOP as Consumers rather than as Producers

• Approximately two-thirds of SEs treat social motives as equally if not more important than profit motives

• India’s SEs are capital hungry businesses -Grants from foundations, incubators, fellowships and competitions are a crucial source of capital for early-stage enterprises

• Finding and retaining good talent, raising capital, and building the value chain create the greatest barriers to sustainability and scale for Social Enterprises

• The greatest financing challenge is not a limited supply of capital but SE limited access to capital that is available

• Despite the challenges, SEs are making a major social impact in India

Source: On the Path to Sustainability and Scale, A Study of India’s Social Enterprise Landscape, Intellecap, April 2012

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Promoting SE in India: Investor Landscape

• Investors have shown a high investment appetite in the past for the sector and the trend

has risen significantly in the past five years – Investments in social ventures expected to

exceed $1 Billion over the next 5 years

• Social Venture Funds (SVF) in India funded mainly by Foreign Capital - NABARD and

SIDBI are the only known institutional Indian investors in Social Venture Funds

• Most of the SVFs target an IRR between 20% to 30% from each investee company and

between 12% to 15% at the overall portfolio level

• There is no dearth of capital, however most money chases enterprises with:

• Established business models

• Presence within the immediate radius of metros and urban centres

• Highly educated and experienced entrepreneurs

• Investment horizons tend to be longer 6 - 8 years; Exits are primarily through

secondary/strategic sale

• Investee sourcing occurs through events, grass root networking, website applications,

referrals and direct visits

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Need higher risk investments in early stage pre-profitability, pre-scale enterprises

Critical role of philanthropic investors • Early role of grants in microfinance • MSDF’s patient investments in urban micro finance, vocational training

Venture capital in higher cost, higher risk enterprises in difficult geographies• Aavishkaar’s/Acumen’s – Multiple investments in pre-profitability enterprises; • Several of these companies got subsequent round of funding from other mainstream

investors Angels, often show higher risk appetites at lower deal sizes and are a lower-cost,

easier to deal with option for early stage entrepreneurs • Intellecap Impact Investor Network / Ennovent Impact Circle• India Angel Network/ Mumbai Angels in the mainstream world

Venture debt for early stage social enterprises• IntelleGrow• Bellwether Debt Fund

Investor engagement - education, innovations in investment structures, code of conduct• National Association of Social Entrepreneurs (NASE)• Indian Impact Invetor Council (IIIC)

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Thank You!

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SE Landscape: Social Impact

Social Enterprises are employing multiple strategies to create an impact at the BOP

More than 25% of enterprises serve over 50,000 beneficiaries at the BOP annually

Impact Strategies Percentage of Enterprises

Providing a critical good or service at an

affordable price

64%

Generating employment opportunities in

underserved areas

51%

Improving livelihood for low-income Producers

by enhancing productivity or market linkages

36%

Conserving or restoring natural resources that

impact the poor directly

22%

Source: On the Path to Sustainability and Scale, A Study of India’s Social Enterprise Landscape, Intellecap, April 2012

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SE Landscape: Balancing ActRoughly two-thirds of Social Enterprises treat the social motive as equally if not more

important than the profit motive.

Balance between Profit and Impact

Impact First: We prioritize maximizing social impact over

maximizing profit.

34%

Impact/Profit Balance: We strive to maximize both, but

sometimes have to make difficult decisions that compromise one

or the other.

35%

Profit First: We prioritize maximizing profit, because we believe

that this is the best way to maximize social impact in the long run.

27%

Pure Profit : We prioritize maximizing profits and strive to make a

social impact when it enhances profitability.

4%

Source: On the Path to Sustainability and Scale, A Study of India’s Social Enterprise Landscape, Intellecap, April 2012

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SE Landscape: Financing

India’s Social Enterprises are capital hungry businesses

More than half of SEs report a need for grant capital with pilot-stage enterprises

expressing the greatest demand

Debt is reported to be the least desired form of capital, but is still in demand by nearly half

of enterprises

None

Debt

Grant

Equity

7%

48%

57%

78%

Capital Needs

Source: On the Path to Sustainability and Scale, A Study of India’s Social Enterprise Landscape, Intellecap, April 2012

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SE Landscape: Financing (cont’d)

Personal funds and money from friends and family are the most common sources of

external capital that SEs secure over the lifetime of the business.

Other

Fellowships

Commercial VC/PE Funds

Incubators

Competitions

Impact or Social Investing Funds

Angel Investors

Foundations/ Grant Makers

Banks

Friends and Family

Personal Funds

3%

11%

11%

28%

29%

24%

23%

26%

30%

47%

74%

Sources of Secured Funding

Source: On the Path to Sustainability and Scale, A Study of India’s Social Enterprise Landscape, Intellecap, April 2012

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SE Landscape: Principal Challenges

Finding and retaining good talent, raising capital and building the value chain are the three

most frequently cited challenges by Social Enterprises.

Incorporating the Enterprise

Finding Mentorship and Support

Measuring Impact

Collecting Information about Target Markets

Building an Organisation

Navigating the Regulatory Environment

Managing a Team Sucessfully

Developing/ Refining a Business

Proving the Model's Scalability

Building a Value Chain

Raising Capital

Hiring/Retaining Qualified Staff

6%

11%

11%

14%

18%

18%

20%

25%

26%

36%

44%

44%

Top Three Challenges to Sustainability and Scale

Source: On the Path to Sustainability and Scale, A Study of India’s Social Enterprise Landscape, Intellecap, April 2012