Aavishkaar Venture Management Services (AVMS), the social venture arm of Aavishkaar-Intellecap Group, has made the first close of its newest impact investment fund at $95 Mn (INR 620 Cr). As stated by Group founder Vineet Rai, the Aavishkaar Bharat Fund will focus on financial inclusion, employment, and promoting grassroots entrepreneurship.
According to sources, the firm is currently looking to attain the final close of the Aavishkaar Bharat Fund within the next 12 to 18 months.
If the social venture firm manages to raise $200 Mn, as it originally set out to do, it would be the largest impact investment fund ever raised by an Indian asset manager. Prior to that, Aavishkaar had raised a total of $200 Mn for its previous five funds.
Among the backers of the Aavishkaar Bharat Fund are large institutional investors like the UK government-run development finance institution CDC Group, Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (NABARD) as well as family offices including that of Hero Enterprise Chairman Sunil Munjal, to a name a few.
Speaking about the fund, Rai said, “Generally, Aavishkaar has either been the first investor or has been the creator of the company. We used to make small investments, generally $306K (INR 2 Cr) to $1.5 Mn (INR 10 Cr). But from this fund, in the first three investments itself, we are making an investment of around $20 Mn (INR 130 Cr).”
Earlier in April, Munjal announced an investment of about $15.4 Mn (INR 100 Cr) in the Aavishkaar Bharat Fund. The fund also raised $25 Mn from UK-based CDC.
Commenting on the development, Alagappan Murugappan, MD Intermediated Equity at CDC Group stated, “With our new $25 Mn commitment to the Aavishkaar Bharat Fund, CDC is pleased to continue supporting the Aavishkaar team as it increases its investment activity in India’s underserved communities. Aavishkaar’s track record and experience put it in a good position to continue backing businesses that create economic opportunity and affordable products and services.”
A Bit About Aavishkaar Venture Management Services
Founded in 2001, Aavishkar is an investment firm with a vision to facilitate development in India’s underserved regions by backing promising entrepreneurs and startups that are working to build sustainable solutions. In addition to providing capital, the firm offers access to a well-connected network of resources to help enterprises scale up.
So far, Aavishkaar has made more than 50 investments at various stages of growth. It has raised six funds, delivering commercial returns with a total of about $201 Mn (INR 1300 Cr) under management. The startups that have raised funding from Aavishkaar in the last few years include luxury lifestyle brand Mela Artisans (2014) and curated ecommerce platform Jaypore (2016), among others.
As per a company statement, Aavishkaar’s approach has resulted in the invested enterprises impacting over 70 Mn lives and creating over 150K jobs and livelihoods. The firm made its international foray with Aavishkaar Frontier Fund, which was used to back up-and-coming businesses in the following countries: Indonesia, Sri Lanka, Bangladesh and Pakistan.
Over the next decade, the Vineet Rai-led venture firm is aiming to invest in up to 300 startups across emerging economies, thereby facilitating sustainable and equitable economic growth. To that end, the company intends to raise $1 Bn in the next 10 years.
Aavishkaar Bharat Fund: An Overview
Aavishkaar Bharat Fund is the firm’s sixth fund and is a SEBI registered Category II Alternative Investment Fund (AIF). It plans to invest in early- and late-stage businesses in sectors that form the bedrock of India’s growth – like agriculture, financial services, education, healthcare, waste management and sanitation, renewable energy and logistics and supply chain.
Elaborating further, Rai added, “So, we are deploying capital in a very strategic manner wherever we are participating in early stage. But more importantly, more than half of our investments will actually not be in startups. Half the investments will be in early stage and the rest in more mature companies.”
When asked why Aavishkaar chose to raise nearly half of the fund’s first close from domestic investors, Rai explained, “We realized that India is no more seen as a developmental hub. The world today acknowledges India not as a country that is poor or developing. Generally, our investors have been development finance institutions (DFIs) and we realized that their interest has moved on to other developing countries or continents like Africa. So, we had to adjust our fundraising strategy and we made a significant focus on India and our old relationships.”
By contrast, the VC firm’s earlier funds were raised with over 95% contribution from overseas backers, and only around 5% from Indian investors.
India is currently hailed as the third largest startup ecosystem in the world. As per the 2017 edition of the NASSCOM-Zinnov report on the ‘Indian Startup Ecosystem – Traversing the maturity cycle’, the Indian startup ecosystem added more than 1,000 tech startups this year, taking the total number of tech startups to 5,000-5,200 from the earlier 4,500.
According to Inc42 DataLabs report, funding deals for startups have increased by an overall average of 18% in the first three quarters of 2017 (from January to September). So far this year, Indian tech startup ecosystem was able to close more than 700 deals (until September 2017) across different segments with a record high investment of $9.4 Bn, a growth of almost 1.35X when compared to total investment in 2016 (January-December).
Several funds have been launched in recent times to enhance startups’ access to capital. In the first week of November, the country’s second-largest private-sector bank, HDFC Bank, launched a startup fund with initial corpus of $25 Mn-$30 Mn. A few days later, Welsh-Canadian business magnate Sir Terry Matthews, who is the Chairman of investment management firm Wesley Clover International, announced the launch of the Alacrity India startup fund in collaboration with Pune-based Ideas to Impacts. Through the Aavishkaar Bharat Fund, the VC firm is looking to provide late-stage startups with the support and infrastructure needed to develop solutions that could help solve some of the country’s most crippling problems.