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MicroVC
Jamais Cascio, 14 Nov 05

aavishkaar.jpgBy and large, people working to improve conditions in the poorer parts of the world consider microcredit -- the practice of offering very small loans to individuals starting small businesses -- to be a successful tool. But microcredit isn't as well-suited for people starting up riskier ventures; the funds needed are often substantially higher, and the more significant risk involved in the startup would inevitably lead to a greater default rate. MIT's Neal Gershenfeld, of Fab Lab fame, described in his book Fab the need for "micro-venture" services in the developing world to support the greater risk and greater upside of local innovation. It turns out that he wasn't alone in seeing that need.

Aavishkaar India Micro Venture Capital Fund started operation in May, 2002, with the goal of promoting development in rural and semi-urban India through funding and operational support. In principle, this differs little from any venture capital company in Silicon Valley or London; the main difference is the size of the required funding: Aavishkaar provides equity ranging from "Rs. 10 lacs to Rs. 50 lacs, approximately USD $20 thousand to USD $100 thousand." They've been careful with the funding -- of the Rs. 5 crore (a bit more than a million US dollars ) raised, Rs. 3.5 crore is yet to be invested.

According to Aavishkaar, their focus is on "sustainable financing" (PDF):

Aavishkaar India Micro Venture Capital Fund (‘Aavishkaar’)

(a) Seeks to provide venture capital to sustainable - socially relevant, environmentally friendly - commercial ventures that otherwise would not have access to capital from traditional sources of finance.

(b) Aims to achieve commercial returns for its global investors such that the chain of innovation – financing – commercialisation and growth continues to be strengthened and

(c) To achieve both the above goals by leveraging its India network to maximize the impact, in terms of growth, employment, productivity and return on its investments

'Aavishkaar' means innovation in Hindi. Hence, Aavishkaar concentrates on supporting micro enterprises based on grassroots innovations.

Companies supported by Aavishkaar include: Craftsbridge, which provides marketing and logistics support for village craafters; Servals, a rural innovation group responsible for the development of micro-irrigation systems and high-efficiency kerosene stoves; Shri Kamadhenu Electronics, makers of equipment for dairy cooperatives that increase production efficiency and transparency; and Tide Technocrats (!), producers of micro-hydro and biomass energy systems for rural villages.

(Via NextBillion.net)

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Comments

After reading Jamais' post, I did a quick bit of research on private equity in India, and came up with this from the Economist: Private Equity in India - A New Frontier, from back in September. The authors note that the most promising category of private equity investment is "growth capital for expanding firms", which includes small- and medium-sized enterprise scale-up. Between Aavishkaar and the traditional private equity sector, there's enough money to make these enterprises work. But how do you identify the right ones, mentor them, get them good market research, and bring them to the VCs? A good place to start is New Ventures, which is starting Indian operations in December.


Posted by: Rob on 15 Nov 05

Aavishkaar India Micro Venture Capital fund has recently invested in Naveen Gram Agrotechnologies Pvt. Ltd., a company based in Rajasthan, which tries to address the challenges of awareness, availability and acceptability faced by small enterprises. For more information, visit www.naveengram.com


Posted by: Priyank on 16 Nov 05

Aavishkaar has also launched a "social entrepreneurship search competition" with prizes of Rs. 200,000 (US$ 4,400) awarded to the winners, in addition to the firm's investment review and due diligence services. Find out more from Priyank's post to NextBillion.net. The competition is co-sponsored by Acumen Fund and The Indus Entrepreneurs - Mumbai.


Posted by: Rob Katz on 16 Nov 05



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