Markets aren’t built overnight. Neither are companies with the potential to change the world.
Vineet Rai has spent the last 15 years building both markets and companies in India, through business advisory firm Intellecap and venture investment firm Aavishkaar.
The two companies merged in January and the new Aavishkaar-Intellecap Group is expanding from India to Southeast Asia and sub-Saharan Africa, bringing a platform of investment and advisory products for high-impact entrepreneurs to some of the world’s fastest-growing markets. The merger was backed with a $25 million investment from Triodos and the Shell Foundation.
The goal is to build businesses that deliver employment, health, energy and financial inclusion for “the other three billion,” as the group refers to low- to middle-income customers in emerging markets. As such consumers gain purchasing power, they are demanding a range of high-value, low-cost services. Nisha Dutt, who joined Intellecap as a manager in 2009, became its CEO in 2015.
Intellecap won a GSG Honors award as a Market Builder of the Year at this week’s GSG Impact Summit in Chicago. GSG is shorthand for the Global Impact Investing Steering Group, the umbrella for the national-level advisory boards originally convened by the (then) G-8 in 2013.
“Making impact investment work isn’t just about the provision of capital,” said Lindsay Clinton, the US director of Intellecap, from the stage as she accepted the award. “It’s also about bringing to bear superior talent, unearthing deep insights, and building strong networks.”
Building a Market
Rai and his team supply hand-holding, nurturing, relentless networking and a full-spectrum of capital services to small and growing businesses. Many of those services come through Intellecap, which through its flagship Sankalp Forums identifies and supports entrepreneurs, creating a viable pipeline of social ventures for investors. The firm’s main operations are in India and Kenya.
The Sankalp Forums are the entry point to Aavishkaar-Intellecap’s full-service ecosystem. “It’s how we enter a market,” says Clinton, who arrived at Intellecap in 2008. “Through Sankalp we learn about a market, get to know the players and help deepen connections between entrepreneurs.”
In September, Intellecap will host a Sankalp Forum in Jakarta, its third in Southeast Asia. Also in September the firm will host its first Sankalp Forum in Europe, in Hague, to explore how European innovation can help deliver the 2030 sustainable development agenda. In Nairobi in February, Intellecap will host the 5th edition of Sankalp Africa. Intellecap’s 9th global summit, in Mumbai, is in December.
Intellecap also works directly with startups, like this year’s GSG Entrepreneur of the Year, 3S India, to develop growth strategies and plans to move from one geography into another. It helps accelerator programs, like Toilet Board Coalition, to source ventures. “High-quality investment opportunities” consistently ranks among the biggest challenges for investors in the annual investor survey from the Global Impact Investing Network.
Through its advisory and investment banking services, Intellecap gains deep insights about a region’s economy and what it takes for businesses to succeed. Since 2003, the firm has worked with 300 corporates, foundations and development agencies, including Unilever and Bosch and the Gates Foundation, to facilitate market entry and the development of innovative financing approaches.
All that lays the foundation for Aavishkaar’s equity funds. The firm has raised a half-dozen funds, including a $75 million “frontier fund” for South and Southeast Asia. It aims to raise a $150 million fund for Africa to launch in 2018. In 2008 the group had $20 million in assets under management. Today it has $400 million.
Young companies also need access to more bread and butter capital they often can’t access via traditional banks. Intellecap launched IntelleCash in 2008 to incubate and finance microfinance institutions. IntelleGrow, founded in 2012 with funding from Intellecap and Shell Foundation, provides flexible debt to small and growing businesses. Dell Foundation and Omidyar backed IntelleGrow in 2014. Intellecap acquired Arohan in 2012, and rebuilt the microfinance institution, which was in dire straits after India’s microfinance crisis.
All told, Intellecap has directed more than $600 million to entrepreneurs serving the emerging middle class in India, Southeast Asia and Africa since 2002. It has syndicated another $300 million from investment partners. It has connected more than 1500 social enterprises to 500 investors and 200 mentors — 60 ventures have gone on to raise more than $220 million.
Like much of impact investing, Intellecap cut its teeth in microfinance. Rai founded Intellecap to advise microfinance institutions.
“Microfinance was a proof point,” says Clinton, showing that business could be profitable and provide value to the poor, she says. “If we could do that in financial services, we thought could work with agribusiness and businesses delivering clean energy and low-cost healthcare.”
New financing from Triodos and Shell Foundation should give it a lift. “India is at the centre of a global economic phenomenon: the emergence of private enterprises delivering public services such as affordable energy, healthcare, education or transportation on a national level,” said Sam Parker, a director at Shell Foundation. “Yet many such enterprises are in their early stages and serve only a relatively small percentage of demand.”
To change the way enterprises get support and access finance Intellecap aims to create 10 breakthrough innovations in the next 10 years, says Clinton. She already counts three notches on Intellecap’s belt. Startupwave, a global incubation platform that already has helped thousands of startups with business planning. Prism, an impact measurement tool tech and Credit-tree, which helps simplify access to finance for women entrepreneurs.
Clinton suggested to ImpactAlpha that the conversation about impact investing, including this week’s GSG Impact Summit, was light on building investable enterprises. That’s where Aavishkaar-Intellecap comes in.
“We are building an ecosystem for impact investing,” Rai said in January when the merger was announced. “That means that you need to invest capital to bring in high quality of senior leadership, you need to bring in technology, you have to invest in incubating innovations that can be disruptive. All of this requires capital.” How much? The Aavishkaar-Intellecap Group aims to grow its assets, including both equity and debt, to $3.5 billion.