Introduction to Impact Investing in India

November 2014
© 2014 Intellecap. All rights reserved
What is a Social or Impact Enterprise?
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.

© 2014 Intellecap. All rights reserved 2

Impact Enterprises in India Increasingly
Attracting Investments

Source – Intellecap Report: Invest, Catalyze, Mainstream

© 2014 Intellecap. All rights reserved 3

Most Active Sectors in this Space

Water &
Health Financial Clean
Edu Agri Sanitatio
care Inclusion Energy
n

Technology Clean
based mHealth,
Drinking
learning, Dairy Tele-health Microfinance Solar devices
Water /
supplementary etc.
Accessibility
platforms

Student / Business
teacher Supply chain Thermal Waste
ERP systems Corresponden
learning aids, efficiency Solutions Management
ce models
kits, etc.

Energy
Vocational Farm Diagnostics Financial Bio / portable
financing
Training Equipment centres, Labs Technologies solutions
solutions

Community
Pre-schools, Warehousing / Tech enabled Biomass /
Water
K-12 etc. Cold storage delivery Biofuels
Solutions

Low-cost
Contract
medical
Farming
devices

© 2014 Intellecap. All rights reserved 4

 Intellecap: Building a Supportive Ecosystem
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.

Providing assistance throughout the lifecycle of an enterprise

Investment
Banking
Largest Social Angel Investment SME Debt
Enterprise Forum Network Lending
Globally

Raising capital from

Identifying and giving Bringing the best impact
Providing debt financial venture capital and
exposure to impact investment
to impact enterprises private equity firms for
enterprises throughout opportunities to
without collateral growth stage
the country individual investors
enterprises

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

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

© 2014 Intellecap. All rights reserved 5

Enterprise Life-cycle Stages

Business Model Market Leader

Finalized, Scale Up
Concept / Business Plan Stage
(~INR 5-10cr)
(up to INR 1cr)

Strategic
Buyers /
Private IPO
Equity
Venture
Capitalists /
Angel Early Stage
Investors / Funds
Media, Networks
Forums,
Accelerator Awards &
Platforms
Incubation
Pre-
Incubation
Idea / Idea
Testing
Pilot / Proof of Concept /
Further Expansion /
Beginning of Revenues
(INR 1-3cr) Growth (>INR 15cr)

© 2014 Intellecap. All rights reserved 6

Incubators and Accelerators
Incubators 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
Accelerators  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
© 2014 Intellecap. All rights reserved 7
Awards, Events, Media
Awards / Platforms / Events
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
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

© 2014 Intellecap. All rights reserved 8

Enterprise Life-cycle Stages

Business Model Market Leader

Finalized, Scale Up
Concept / Business Plan Stage
(~INR 5-10cr)
(up to INR 1cr)

Strategic
Buyers / IPO
Private
Equity
Venture
Capitalists /
Angel Early Stage
Investors / Funds
Media, Networks
Forums &
Accelerators Recognition
Platforms
Incubation

Pre-
Incubation
Idea / Idea
Testing

Pilot / Proof of Concept /

Further Expansion /
Beginning of Revenues
(INR 1-3cr) Growth (>INR 15cr)

© 2014 Intellecap. All rights reserved 9

Intellecap Impact Investment Network (I3N
or I-cube-N)
India’s first angel network focused on funding impact enterprises.

60 investor members and partners. 800+ enterprises screened.

50 carefully vetted enterprises showcased. 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.

The network is an initiative of and is supported by

© 2014 Intellecap. All rights reserved 10

Select Institutional Members and Partners of I3N

Omnia
Education

DriveChange Venture
Energy & Education
Lab
© 2014 Intellecap. All rights reserved 11
Our High-Touch Process

Angel Co-Investment Model

Showcase
Careful and
Multi-Pronged Pre-Showcase Post-Showcase
Screening Facilitate
Deal Sourcing Engagement Engagement
Co-
Investments

Referrals + feet on Getting you the Money:

Making you Investor ready: Pitch in front of an
the ground + deep • Identify the right investors
• Assist in preparation of exclusive network
pan-India sourcing • Facilitate conversations,
collaterals (IM, model etc.) of 60 investors
• Deep-dive into financial meetings and field visits
model with investors
• Fine-tune investor • Negotiate valuation, terms,
presentation conditions and structure of
• Mock pitches investment
• Assist in drafting of
important documents like
term sheets, SSHA etc.
© 2014 Intellecap. All rights reserved 12
Our criteria
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.

Background and
Uniqueness of the
Commitment of the Size of the Market
Idea or Model
Promoter Team

Impact

Progress so Far /
Robustness and
Demonstrated Low Competition /
Scalability of the
Proof of Concept on Barriers to Entry
Business Model
the Ground

© 2014 Intellecap. All rights reserved 13

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: Livelihoods Sector: Education Sector: Healthcare Sector: Agriculture Sector: Skills Sector:
Training Crowdfunding.
Post investment, Post investment, in Raised a bridge Currently, raising
have raised a the market to raise a round and currently Series A round Currently, raising Currently, raising
follow on round of follow on round of raising Series A Series A round Series A round
INR 10cr. INR 5cr. round

A Medical
Device
Company

Sector: Clean Sector: Clean

Sector: Healthcare
Energy Energy

© 2014 Intellecap. All rights reserved

Other Players
Angel Investment and Mentoring Networks 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.
Early Stage 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.
© 2014 Intellecap. All rights reserved 15
Typical Investment Process

Prepare Collateral: Business Due

Approach Angel Pitch
IM + Financial Diligence
Investors
Model

Share-
Legal and Financial
Receive Investment Holder’s Term Sheet
DD
Agreement

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!

© 2014 Intellecap. All rights reserved 16

 Thank You!
http://www.i3n.co.in
i3n@intellecap.com

Aditi Shrivastava
aditi.shrivastava@intellecap.com
+91 9987824798

Sohil Shah
sohil.shah@intellecap.com
+91 9820917047

© 2014 Intellecap. All rights reserved 17

 StartupWave
India’s first free-to-use virtual incubator
StartupWave is democratizing incubation by providing in-place support to any startups that has a
business idea
www.startupwave.co
 Launched in April 2014, StartupWave offers a
Startups
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 Space
Mentors
Incubators
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 Angel
 Extended incubation support for startups will be Investors
launched on the platform shortly

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/
© 2014 Intellecap. All rights reserved 18
Fundraising 101

© 2014 Intellecap. All rights reserved 19

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.

• 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.

© 2014 Intellecap. All rights reserved 20

How Much? What Kind? Who From?

How Much to Raise What to Raise Who to Raise From

• Start the process of capital • Many instruments at your • To begin:

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.
disposal: • Self
• Equity • Friends, family, fools
• Quasi-equity / • Soft(er) money:
convertibles
• Awards / incubators /
• Debt
accelerators
• Grants
• Government bodies
• Raising equity is glamorous, so • Debt:
most entrepreneurs think of • Venture debt funds
equity first.
• Banks
• Equity is NOT cheaper than • Equity:
debt.
• Angel investors
• What to raise equity for: hiring,
• Venture Capitalists
marketing, sales, building • PE funds
product.
• Make a list of investors: Not
• What to raise debt for: capex,
working capital, etc. only ones that would be
interested in you, but also ones
• Ok to raise grants, but don’t that you are interested in.
develop the habit of soft money.

© 2014 Intellecap. All rights reserved 21

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: Livelihoods Sector: Education Sector: Healthcare Sector: Agriculture Sector: Skills Sector:
Training Crowdfunding.
Company Profile: Company Profile: Company Profile: Company Profile:
LabourNet is a Meracareerguide is iKure provides Agrostar is a direct- Company Profile: Company Profile:
skills development an online career primary healthcare to- Head Held High Ketto is a
company for counselling and to patients in rural farmer channel that trains rural youth in crowdfunding
informal sector career assessment India. addresses significant English, platform for causes
workers. platform to help gaps Computers, and bringing
students make Investment Size: in the traditional rural Math, and places accountability,
Investment Size: informed career INR 1cr agricultural retail them in local jobs. instant tax receipts,
INR 1.5cr decisions. supply-chain. post-donation
Revenue Growth Investment Size: engagement to
Revenue Growth Investment Size: post investment: Investment Size: INR 2.5cr donors.
post investment: INR 1cr 200% INR 4cr
400% Revenue Growth Investment Size:
Revenue Growth Raised a bridge Revenue Growth post investment: INR 77 lakhs.
Post investment, post investment: round and currently post investment: 200%
have raised a 200% raising Series A 1000% Revenue Growth
follow on round of round Currently, raising post investment:
INR 10cr from Post investment, in Currently, raising Series A round 100%
institutional the market to raise a Series A round
investors. follow on round of Currently, raising
INR 5cr. Series A round

© 2014 Intellecap. All rights reserved