Artha: Indian VCs please stand up

Indian venture capital firms must start living up to the risks they say they are taking when it comes to investing into key domestic industries such as agriculture, according to Audrey Selian, director of  Artha Initiative, an online platform which connects ultra-high net worth individuals with social enterprises.

Speaking at a webinar hosted by the Asia Venture Philanthropy Network, Selian and others bemoaned the lack of investment into social enterprises in India by the private sector, despite the prime location and ability of these organisations to make a difference.

The domestic investor base, as well as foreign private investors, need to acclimatise to the long investment periods associated with impact investment, added Selian. And significant focus is needed to establish extensive pipelines of investable social enterprises to improve the funding gap the sector is facing.

There are already business accelerators established across the country which help to prepare these social start-ups for the transition from charity operations to profitable business activities. The Centre for Social Innovation and Entrepreneurship in Madras houses a growing cluster of agribusiness social enterprises. One example, Zameen, is a marketing company operated and owned by cotton farmers, which markets their Fairtrade produce. The company received Rs20 million ($324 million; €261 million) in its first year from the Rabobank Foundation, Rabobank’s donor arm, and Aavishkar, an Indian early stage investment firm.

Social enterprises also provide service coverage to a wide range of people, according to Devangshu Datta, a member of Indian impact investor network Ennovent. Datta noted that charities have historically focused on rural funding while newer private equity and venture capital outfits have focused on India’s urban middle class. Social enterprises serve both these communities with a mix of the visions of both sectors.

Young companies, with no proven profitability, are in a blind spot for many private investors, despite targeting a customer base of 800 million people.

India’s social enterprise ‘ecosystem’, made up of around 15 organisations, has grown significantly in the last few years, according to Selian.