Introduction to Impact Investing in India By Intellecap

© 2014 Intellecap. All rights reserved

Introduction to Impact Investing in India

November 2014


What is a Social or Impact Enterprise?

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A for-profit enterprise dedicated to bringing about either an environmental benefit,

or a social benefit – i.e. provide affordable products or services to rural, low-income, under-privileged

populations.

Maximize topline while maximizing impact.

Usually, low margin, high volume business.

Operate in difficult, under-penetrated markets.

Innovate less on technology, more on products, services, pricing, distribution.

High geography, execution, first mover risk.

Usually a Pvt. Ltd. setup.

Ability to scale to offer return to investors.


Impact Enterprises in India Increasingly

Attracting Investments

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Source – Intellecap Report: Invest, Catalyze, Mainstream


Most Active Sectors in this Space

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Technology based

Technology based

learning, supplementary

platforms

Student / teacher

learning aids, kits, etc.

Vocational Training

Pre-schools, K-12 etc.

Edu

Dairy

Supply chain efficiency

Farm Equipment

Warehousing / Cold storage

Contract Farming

Agri

mHealth, Tele-health

etc.

ERP systems

Diagnostics centres, Labs

Tech enabled delivery

Low-cost medical devices

Health care

Microfinance

Business Corresponden

ce models

Financial Technologies

Financial Inclusion

Solar devices

Thermal Solutions

Energy financing solutions

Biomass / Biofuels

Clean Energy

Clean Drinking Water /

Accessibility

Waste Management

Bio / portable solutions

Community Water

Solutions

Water & Sanitatio

n


Intellecap: Building a Supportive Ecosystem

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Founded in 2002, Intellecap is a pioneer in the impact investment space, with a mission to

provide innovative business solutions that help build and scale sustainable enterprises

dedicated to social and environmental change.

Largest Social

Enterprise Forum

Globally

Angel Investment

NetworkSME Debt

Lending

Investment

Banking

Providing assistance throughout the lifecycle of an enterprise

Identifying and giving exposure to impact

enterprises throughout the country

Bringing the best impact investment

opportunities to individual investors

Providing debt financial to impact enterprises

without collateral

Raising capital from venture capital and

private equity firms for growth stage enterprises

Backed by excellent relationships with all kinds of players in the space

(including foundations, corporates, governments) and a strong research team.


Enterprise Life-cycle Stages

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Concept / Business Plan Stage

(up to INR 1cr)

Pilot / Proof of Concept /

Beginning of Revenues

(INR 1-3cr)

Business Model

Finalized, Scale Up

(~INR 5-10cr)

Further Expansion /

Growth (>INR 15cr)

Market Leader

Idea / Idea Testing

Pre-Incubation

Incubation

Accelerator

Media, Forums, Awards & Platforms

Angel Investors / Networks

Venture Capitalists / Early Stage Funds

Private Equity

Strategic Buyers / IPO


Incubators and Accelerators

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Incubators

Accelerators

Incubators: Often association with a university Most often non-profit Usually go when you are idea /

business plan level Usually offer physical space Full time over 6 months – 2 years Aid in business plan ideation and

building Aid in incorporation Offer mentoring Usually take stake in the company

Accelerators: Usually go once you already have

some proof of concept / execution on the ground

Offer business plan deep dive Investment deck and financial model

building Often have a peer to peer review

component Sessions over 3-6 months Tie up with funding partners at the end

of the program


Awards, Events, Media

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Awards / Platforms / Events

Media

Events: Networking Knowledge building Bouncing your idea off investors

Awards / Platforms: Exposure to investors, other

players Visibility and credibility Jury panels Bootcamps in business

modeling, financial modeling, etc.

Usually a cash prize for winners as grant / soft terms

Media: Visibility and credibility Articles / online media circulated

widely TV shows, etc. take time to

record and are not watched by too many

Put links on your website


Enterprise Life-cycle Stages

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Concept / Business Plan Stage

(up to INR 1cr)

Pilot / Proof of Concept /

Beginning of Revenues

(INR 1-3cr)

Business Model

Finalized, Scale Up

(~INR 5-10cr)

Further Expansion /

Growth (>INR 15cr)

Market Leader

Idea / Idea Testing

Pre-Incubation

Incubation

Accelerators

Media, Forums & Recognition Platforms

Angel Investors / Networks

Venture Capitalists / Early Stage Funds

Private Equity

Strategic Buyers / IPO

© 2014 Intellecap. All rights reserved 10

Intellecap Impact Investment Network (I3N

or I-cube-N)

60 investor members and partners.

50 carefully vetted enterprises showcased.

800+ enterprises screened.

9 enterprises funded

Deep domain knowledge of Intellecap, a 10-year old advisory firm dedicated to impact.

Quarterly showcases of carefully screened enterprises. Focus on impact, sustainability, scalability.

Investment horizon of ~5 years. Average return expectations for angel investors: 8%-15%.

Exit usually via further rounds of capital raise by VC / PE firms.

Knowledge sharing through monthly newsletters, sector deep dive tele-seminars.

India’s first angel network focused on funding impact enterprises.

The network is an initiative of and is supported by


Select Institutional Members and Partners of I3N

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Omnia Education

Venture Lab

DriveChangeEnergy & Education

http://www.drivechange.in/

http://www.drivechange.in/


Our High-Touch Process

Pre-Showcase

Engagement

Referrals + feet on

the ground + deep

pan-India sourcing

Post-Showcase

Engagement

Showcase

and

Facilitate

Co-

Investments

Multi-Pronged

Deal Sourcing

Careful

Screening

Angel Co-Investment Model

Pitch in front of an

exclusive network

of 60 investors

Getting you the Money:

• Identify the right investors

• Facilitate conversations,

meetings and field visits

with investors

• Negotiate valuation, terms,

conditions and structure of

investment

• Assist in drafting of

important documents like

term sheets, SSHA etc.

Making you Investor ready:

• Assist in preparation of

collaterals (IM, model etc.)

• Deep-dive into financial

model

• Fine-tune investor

presentation

• Mock pitches


Our criteria

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Background and Commitment of the

Promoter Team

Uniqueness of the Idea or Model

Size of the Market

Progress so Far / Demonstrated

Proof of Concept on the Ground

Robustness and Scalability of the Business Model

Low Competition / Barriers to Entry

Early stage enterprises are usually evaluated on the following.

Apart from the impact, the other factors of evaluation

are common across impact enterprises and regular for-profit startups.

Impact


Enterprises Funded by I3N Angel Network

In the last 2.5 years, 9 of our ~50 showcased enterprises have received investments,

and we are currently in advanced stages of facilitating 3 more investments.

Sector: Agriculture

Currently, raising

Series A round

Sector: Healthcare

Raised a bridge

round and currently

raising Series A

round

Sector: Education

Post investment, in

the market to raise a

follow on round of

INR 5cr.

Sector: Livelihoods

Post investment,

have raised a

follow on round of

INR 10cr.

Sector: Skills

Training

Currently, raising

Series A round

Sector:

Crowdfunding.

Currently, raising

Series A round

Sector: Clean Energy

Sector: Clean Energy

Sector: Healthcare

A Medical

Device

Company

http://www.head-held-high.com


Other Players

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Angel Investment and Mentoring Networks

Early Stage Funds

Angel Networks: Networks of individual investors,

early stage funds Investors co-invest as a group Each investor in the network is

the decision maker Usually upto 2-3cr in funding Most often, faster than funds.

Could have longer transaction timelines if not able to fill the deal

Varied group of investors expands mandate

Funds: Very early funds have ticket

sizes between 50 lakhs and 2-3cr

Many are members of angel networks

Have well-defined mandates Main partner / IC is the decision

maker Can have longer transaction

timelines because of stress on DD, small teams, etc.


Typical Investment Process

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Prepare Collateral: IM + Financial

Model

Approach Angel Investors

PitchBusiness Due

Diligence

Term SheetLegal and Financial

DD

Share-

Holder’s

Agreement

Receive Investment

Fund raising can take as long as 6 months or

even more at times!

PATIENCE and FLEXIBILITY are critical to a faster and a smoother fund

raise!


Thank You!

http://www.i3n.co.in

[email protected]

Aditi Shrivastava

[email protected]

+91 9987824798

Sohil Shah

[email protected]

+91 9820917047

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http://i3n.co.in/

mailto:[email protected]




StartupWave

India’s first free-to-use virtual incubator

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Launched in April 2014, StartupWave offers a

mix of online and in-person delivery models for

low cost and scalable incubation

Tailored for idea or early stage enterprises

seeking mentorship or incubation support

Currently offers pre-incubation services that are

designed for idea to pilot stage startups and are

tailored to help them get accepted into incubators

Brings together investors, mentors and

incubators on a common platform

Extended incubation support for startups will be

launched on the platform shortly

StartupWave is democratizing incubation by providing in-place support to any startups that has a

business idea

Startups

Space Incubators

Angel Investors

Mentors

www.startupwave.co

StartupWave has been conceptualized by Intellecap in partnership with Government of UK’s Department for

International Development in India and GIZ on behalf of the German Ministry of Economic Cooperation and

Development (BMZ)

If you’re an idea-stage entrepreneur looking for incubation support or incubators and accelerators get in touch!

http://www.startupwave.co/beta/contact/

http://www.startupwave.co/

http://www.startupwave.co/





Fundraising 101


When is Your Business Ready to Receive

Capital?

"Don't raise a lot of money. Then you'll be on the express train. Take the local train -- it goes

slower and there are more places to get off.“

~ Mark Suster, Founder BuildOnline and Coral, Investment Partner at GRP Partners.

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• You have proof that your business is viable and can scale. E.g. pilot, paying customers, signed

partnerships etc.

Tip: You have a calendar of milestones and can show that you have achieved the first 2-3 goals.

• You have built a team around your startup with part of 2nd line of management + field staff in place

Tip: At least one of your team members has past experience/academic background in your sector.

• You are dynamic as a startup and ready to pivot your business model based on customer feedback and

market needs.

Tip: You have already refined your model by the time you meet an investor and can show how your

model has evolved.

• You are focused as a startup and have one core area of operations.

Tip: If your core business needs significant demand creation before it can take off; then you

probably need a hybrid model with grant funding before you think of equity.

• You have realistic forecasts for the next 6 months and a good idea of the next 12. You are raising seed

capital to see you through the next 12-18 months now.

Tip: You already know that you will be raising a follow-up round after 18 months at (hopefully) a

higher valuation.


How Much? What Kind? Who From?

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How Much to Raise

• Start the process of capital raising when you still have 4-6 months of operating cash left.

• If you are in prototype stage, raise the capital you need to finish testing and go to market.

• If you already have a proof of concept / are already generating revenues, raise the capital you need for 12-18 months.

• Cash flow statement (from your financial model) will give a good picture what how much you need.

• Be asset light – investors don’t like giving money for land, capex, patents.

• Don’t raise too little –fundraising is time consuming and often you dilute the same stake regardless.

What to Raise

• Many instruments at your disposal:

• Equity

• Quasi-equity / convertibles

• Debt

• Grants

• Raising equity is glamorous, so most entrepreneurs think of equity first.

• Equity is NOT cheaper than debt.

• What to raise equity for: hiring, marketing, sales, building product.

• What to raise debt for: capex, working capital, etc.

• Ok to raise grants, but don’t develop the habit of soft money.

Who to Raise From

• To begin:

• Self

• Friends, family, fools

• Soft(er) money:

• Awards / incubators / accelerators

• Government bodies

• Debt:

• Venture debt funds

• Banks

• Equity:

• Angel investors

• Venture Capitalists

• PE funds

• Make a list of investors: Not only ones that would be interested in you, but also ones that you are interested in.


Enterprises Funded by I3N Angel Network

In the last 2.5 years, 9 of our ~50 showcased enterprises have received investments,

and we are currently in advanced stages of facilitating 3 more investments.

Sector: Agriculture

Company Profile:

Agrostar is a direct-

to-

farmer channel that

addresses significant

gaps

in the traditional rural

agricultural retail

supply-chain.

Investment Size:

INR 4cr

Revenue Growth

post investment:1000%

Currently, raising

Series A round

Sector: Healthcare

Company Profile:

iKure provides

primary healthcare

to patients in rural

India.

Investment Size:

INR 1cr

Revenue Growth

post investment:

200%

Raised a bridge

round and currently

raising Series A

round

Sector: Education

Company Profile:

Meracareerguide is

an online career

counselling and

career assessment

platform to help

students make

informed career

decisions.

Investment Size:

INR 1cr

Revenue Growth

post investment:

200%

Post investment, in

the market to raise a

follow on round of

INR 5cr.

Sector: Livelihoods

Company Profile:

LabourNet is a

skills development

company for informal sector

workers.

Investment Size:INR 1.5cr

Revenue Growth

post investment:400%

Post investment,

have raised a follow on round of

INR 10cr from

institutional

investors.

Sector: Skills

Training

Company Profile:

Head Held High

trains rural youth in

English,

Computers, and

Math, and places

them in local jobs.

Investment Size:

INR 2.5cr

Revenue Growth

post investment:

200%

Currently, raising

Series A round

Sector:

Crowdfunding.

Company Profile:

Ketto is a

crowdfunding

platform for causes

bringing

accountability,

instant tax receipts,

post-donation

engagement to

donors.

Investment Size:

INR 77 lakhs.

Revenue Growth

post investment:

100%

Currently, raising

Series A round

http://www.head-held-high.com

Introduction to Impact Investing in India By Intellecap

Small Business & Entrepreneurship

Transcript of Introduction to Impact Investing in India By Intellecap