The Aavishkaar India Micro Venture Capital Fund (Aavishkaar) is a venture fund founded to promote development in rural and semi-urban India. Vineet Rai is a founder and the CEO of Aavishkaar. Rai is responsible for overall management of the fund. Prior to Aavishkaar, Rai was a founder and the CEO of GIAN, an incubator for rural innovations and ventures based in Ahmedabad, Gujarat. At GIAN, Rai was responsible for identifying, evaluating, nurturing and launching grassroot-innovation-based micro-level enterprises for poverty alleviation.

Vineet Rai Chief Executive Officer, Aavishkaar Venture Management Services

Are you evaluating new business plans irrespective of the slowdown? How much money do you have for investment?
We have US$10 million committed in a micro-finance fund out of $18 million. We will do two to three more investments. We have a large part of a micro-credit fund that is still available. We could do around 25 more investments in the next couple of years.

Are most of the companies you invest in located in semi-urban and rural areas?
Not necessarily. Take the example of rangSutra Crafts. It is headquartered in Delhi, but 98% of its employees, staff, and owners live in remote villages of Bikaner. Aavishkaar does not really believe in investing in rural India just for the sake of investment. We invest in a company and the people working in it could be coming from anywhere. But it is their motivation, it is the product and the service that should be either sourced out of rural India or delivered in rural India.

What is your investment strategy? What do you look for before deciding to invest?
We have a fairly elaborate structure. One, we are very clear on the area and space we are looking at. Avishkaar started as a fund that would provide investments to those who don’t get them. However, there are a lot of people who do not get investments, and we can’t provide money to everybody. We provide investments at a very early stage, sometimes even when the idea is conceptual.

How is your investment strategy different from those of other VC funds?
We first look at whether we get along with the entrepreneur. Second, does the entrepreneur have a mindset that is not completely driven by money? We have a concept of greed management. We believe that venture capital, as a pure play activity, is completely driven by greed. Profit maximization is a very good idea but it does not normally create robust, long-term companies. I can be completely disputed because people have created very good companies despite getting venture capital. When promoters start their business, profit maximization at any cost is not their sole strategy. Most VCs are focused on profit maximization at any cost, but we believe that we are here to optimize the profits and not maximize it. While doing so, we also look at how the promoter is trying to optimize their returns and the returns to society. We don’t believe that we can build businesses exclusive of the society. They have to be inclusive.

We are looking at something called inclusive capitalism. We are looking beyond one promoter. We try to look at it as if everybody has an ownership in the company and that is not limited to some ESOPs given to two or five people. We are for ownership across a cross-section, including your vendor and supplier. So this way, your ecosystem is so strong that your chances of failure are much less. In the current environment what is clear is that greed as a co-driver cannot sustain even the capitalist model. It has taken us nine years and that is very unfortunate. You need to control greed at some point in time.

Can you give examples of some of the companies you have invested in that reflect the ideology behind the fund?
Servals Automation, the company that makes stove burners. These are used by people in the lower strata both in urban and rural India. This company was initially based in Chennai and used to produce and sell both in rural and urban India. Then it outsourced its entire production to villages. The promoter of the company said that he did not believe in mass production, he believed in production by masses. Thus, this company has created employment in places where none existed; it has found a way of including villages in its production sources, which cuts its cost of production. They continue to sell in both rural and urban India. So, here is a production mechanism that is coming out of rural India and selling in both urban and rural India, while the company is technically based in Chennai.

rangSutra has 26% ownership by artisans. They are based in Delhi, but in the villages in and around Bikaner is where it manufactures all its products. They put it together and then sell it in Delhi, and then it goes to Fabindia and many other places. It is sold in urban India and abroad, but it is produced in extremely remote areas.

Vatsalya has set up hospitals in tier-II and -III cities. They have a hub-and-spoke model where they set up clinics in small towns. Their idea is to provide high-quality service to people in the lower strata of the society; it’s like the high-quality service of Apollo at much lower prices.

What is the minimum ticket size of your investments?
We do investments as small as Rs 15 lakh, and in the first round we normally stop our investment at Rs 2 crore. We can do more than that, but we will never cross Rs 5 to 6 crore. That is the largest we will do. In the first round we normally invest Rs 2 to 2.5 crore.

What percentage of your investments have failed? Isn’t there a higher risk to the investments that you make?
We have two companies out of 20 that have failed. One has actually failed, while the other may still recover.

Technically, a higher degree of risk does exist, but actually higher degree of risk in what? How you define risk is the first challenge. The type of risk depends on what outcome you are looking for. If the outcome you are looking for is a Rs 10,000 crore company, then it carries a very high risk. We have small companies that have the potential to reach Rs 100 crore or Rs 200 crore or Rs 400 crore, but if you actually define reaching Rs 100 crore, then may be two of our companies will reach it or may be five. Of the 20 companies, I may have five that may reach Rs 100 crore. But a large number of our companies will be between Rs 20 and Rs 80 crore after five to seven years. This according to a mainstream fund would be a failure. A large number of these people would not be able to do an IPO. For us, it is not a failure because we have created these companies when we invested in the pre-revenue stage, in geographies and areas and businesses that are not mainstream. These are not businesses that can follow a hockey stick growth.

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Start-Up Funding Required for Product Based Accounting Softwares
written by Mr. Supriya Dutta, February 03, 2010

Dear Sir,
I’m a marketing professional and is looking for product based software development funding. There are 4 members in my team consisting of my childhood friend who is an aspirant Chartered Accountant, two software developers and myself an M.B.A and having 4 years of Sales & Operations Experience in Telecom and Financial Industry respectively in the profile of Channel Management and Relationship Management. We’re seeking funding for accounting based software development and setting up PAN India Distributor set-up for the same. Please contact me in case if you find this proposal interesting and lucrative.

Warm Regards,
Mr. Supriya Dutta,
Kolkata, India,
(M) +919874545880,
E-Mail:- duttasupriyo@yahoo.com

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