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The venture, which is both a social impact fund as well as a business incubator, was set up 18 months ago, and has funded close to two dozen companies across businesses that range from cleaning the Ganga to building low-cost robotic exoskeletons for disabled workers.
FISE or the Foundation for Innovation and Social Entrepreneurship — set up by Manoj Kumar, who serves as Tata Trusts senior advisor — is supported by the government's Department of Science and Technology.
With a pipeline of start-ups in place, FISE’s next big move will be to set up infrastructure — the Tata Smart Energy Incubation Center, a 40,000 sqft facility in Delhi’s Rohini, is expected to be launched next month, besides a health-care facility. Thereafter, at least “one lab will go live” every six months for two years, said Kumar, adding that each centre will be either industry or theme focussed.
Tata Trusts has committed Rs 300 million to these labs in addition to the initial amount of Rs 500 million set aside for the start-ups, besides Rs 100 million from the Department of Science and Technology.
According to Kumar, FISE’s objective is not profit or valuation, but to dust off and polish start-ups to help them take where others will be interested.
The Trusts and FISE do have skin in the game, but the overarching objective, as Kumar noted, is "to fund those kinds of companies and models which no other investor will normally touch with a barge pole”.
"When no one else gives these start-ups funds, we do. So, you could say our model is to fund high-risk, uncertain return business models," Kumar said.
FISE usually does not assist microfinance start-ups or an e-commerce fashion platform which other venture capitalists will jump at. According to Kumar, FISE helps ideas having social impact, for example a portable MRI machine that can deliver reports at one-fifth of the cost or an easily accessible world-class toilet.
"If you want to have deep and irreversible impact on a social scale, then you have to try different things, and not use the same approach again and again," Kumar recalled being told by Ratan Tata when they were planning the venture.
Vikram Chachra, founding partner of Eight Innovate Partners, a start-up venture fund, said that in an ideal world, venture capitalists should also be thinking along the same lines. "There are no giant platforms like an Amazon or a Cisco to gobble up smaller players, so effectively investors end up buying and selling management teams," said Chachra, adding that the existing venture capital model is — “if you've invested $100 million in a business in India, then you need at least 10 per cent back on a $1-billion IPO, and how many of those happen?”
There are a few similar platforms like FISE, such as the Omidyar Foundation and the Foundation for Ecological Security, which work for transformation of society at large.
“To be honest there aren't very many social impact funds that have seen too much success in India,” said Padmaja Ruparel, co-founder of Indian Angel Network. "Before social impact funds there was philanthropy, but the downside was when the money stopped, the good work stopped," Ruparel said. "Social impact funds could and should change all that."
Kumar, on the other hand, said his eyes are “wide open” to how things may shape up. “If we fail, well then we fail, but if we see success then we'll see it happen disproportionately."