Samyak – The Intern, on Impact Investing

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Samyak says ->

Recently “Bijli” was in news. No, I am not referring to any dance item number, but in fact to a social impact project by The Climate Group, an independent not-for-profit organisation headquartered in London, in association with the Sunsaluter, a social enterprise working on providing sustainable energy. Nowadays, we hear a lot about social enterprises, a sector where attention from impact investors and donors has begun to crescendo.

India is witnessing a rapid change in the Impact ecosystem. We are currently suffused with a variety of business ideas that propose wide impact, as the financial ecosystem of startups is changing. Increasing number of impact investors, institutions and organizations are coming forward to support these social enterprises in multiple ways. The for-profit social enterprises are taking the center stage, as they appeal to both the impact investors and foundations alike. People are calling this the gold rush of impact investing comparing it to the ‘Tech Gold Rush of 2000’. This may seem far-fetched, but it holds an element of truth to it.

Many investors have shown their reservations about the social enterprises, stating that although they have ideas and innovations but they lack “investment readiness”. This remains a critical challenge to the growing impact investing industry. This creates a financing gap in the impact startup ecosystem, leading to a deadlock. The investors believe that although the enterprises are lucrative, they lack industry infrastructure and refined business models. The investors do not wish to invest in such enterprises. In this regard, debt funding is an elusive dream to the social enterprises ecosystem.

An extensive study of India’s Social Enterprise Landscape was conducted by Intellecap in the recent past. It was identified that these enterprises were facing hindrances to sustainability and scale. Steady state enterprises are not able to secure capital they need to scale. Here is an extract from the study: “While raising seed capital is an immense challenge that most enterprises face early in their development, enterprises who find themselves stuck in the steady state have even greater difficulty securing capital than their early-stage counterparts. Steady state enterprises provide the same responses as enterprises at other stages to why they have encountered these funding restraints. They cannot meet equity investors’ revenue requirements or the business model needs further refinement.” The problems that growing social enterprises face are thus apparent.

In February 2014, a speed dating session was organized along with GIZ (International Enterprise of German Government) during Sankalp. Sankalp Forum is an enabling platform that helps social enterprises find investors, mentors and scale. The session saw 9 Lenders/Banks interact with 35+ enterprises from a wide variety of sectors and stages. Hurdles came into view and PRAISE was conceptualized as an afterthought to tackle these issues. SIDBI, GIZ and 91springboard along with a group of experts and investors have come together to help make the enterprise “investment ready” on fronts other than business alone through the PRAISE Program (find out more on PRAISE here).

I believe there is a lot of scope in developing the impact ecosystem in the country today, through the active efforts of such institutions, and truly make it the “Gold Rush of Impact Investing.”

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This is a blog article by Samyak Jain, who is from IIT Kanpur and is interning with us at 91springboard.

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