What is the status of innovation system in India with respect to social innovation? What do you look at before investing in a firm?
We see innovation in a couple of different areas. And, one of the key things we look for is if the business is highly scalable and profitable but has inherent built-in social impact. So, we are focused on education and health care, while another area, which is proving to be highly interesting, is what we call “livelihoods”. For example, labour-as-a-service, which connects the suppliers to their customers. It not only increases the efficiency and income of the labour but also the convenience and value for the customers. And, technology is helping in making that possible. We are seeing similar things happening in financial technologies, which can be relevant for the lower-strata of the population by providing them access to financial services. So, FinTech is emerging and is very interesting.
Between profitability and social objective, where do you play?
Profit has to come first. Social objective will be maximised if profit comes first. Because, that will enable creation of businesses that are strong, they can grow in scale quickly and can raise the capital they require to scale and ultimately deliver social benefits along the way. If you are focused on social objectives first, you might deliver deeper impact but not much total impact in absence of ability to scale. Ultimately, you will not be able to raise money for that. For example, one of our portfolio companies is GoCoop, a marketplace for cooperatives focusing on handlooms and other crafts. GoCoop give cooperative producers access to global markets. So, their income goes up; buyers also get access to high-quality made-in-India goods and GoCoop makes margins in the middle.
Given the spurt in entrepreneurship backed by government initiatives and private individuals, are you looking at raising investment in the country?
We see great opportunities in India. Our first fund of $23 million has largely been invested or committed at this point, and we are only starting to raise a $50-million fund and that would be invested entirely in India in companies that have scaled business models with interesting built-in social impact. Our first fund was largely raised from limited partners (LPs) including Bill Gates and T V Mohandas Pai, Ranjan Pai of Manipal Group here. We are just beginning the process to finalise the second fund; the first close will happen in this summer. In the past three years, we looked at 2,300 deals to complete only 22. So, we have around one per cent yield, which means we are highly selective in picking up deals.
In how many Indian companies have you invested so far?
We have invested in 22 companies so far, of which we had one partial exit from a company that is into education. Our portfolio is dominated by education and health care, though there are a few other areas like labour-on-demand that we are finding interesting. We have even invested in a company in Hubli called LabInApp, a 3D simulation interactive tool for CBSE curriculum, catering to students from Class IX to XII. There is a firm called UE LifeSciences, which has developed low-cost devices for breast cancer screening.
For less than a couple of hundred rupees, it can do a highly accurate scan using ultrasound technology with only a partially trained operator. It does not require radiologists or doctors. It plans to scan 100,000 women in the near term in India.
What is your exit strategy?
We don’t look at immediate exits. We are a seed investor and we invest very early during the first institutional capital round. And then, we invest again in series ‘A’ round. We might take a partial or complete exit in series ‘B’ or ‘C’ rounds.