Aavishkaar, the Modern Day Impact Investor
It took Vineet Rai four long years to raise his first million dollars. Rai and his team are now busy building a fund worth $500 million.
Vineet Rai turned a venture capitalist quite by chance. “I was doing research for the Biological Diversity Act of 2002 at IIM Ahmedabad,” he recalls, “and was later offered the role of CEO at the Gujarat government’s business incubator for innovation and development of rural areas (the Gujarat Grassroots Innovations Augmentation Network – GIAN). There I realised providing only capital is not enough to help rural businesses. The only way to make a difference was to take both capital and talent to help build businesses locally.”
He decided to do just that, but then Rai was scarcely a stock market shark. “I had no idea how to raise money,” he muses. It took him four long years to raise his first million dollars. “But bit by bit I learned. There are foundations and endowments which will give to venture funds dedicated to rural and small businesses,” Rai says.
In 2001, he travelled to Singapore to make an investment pitch to non-resident Indians (NRIs). “As a 29-year-old forester with no experience (even the air ticket was sponsored), I remember being given a lift in the car by Arun and Laxmi Diaz to show me around Singapore.” Arun Diaz, a veteran entrepreneur and investor would later become a key advisor and partner in Rai’s new venture capital fund.
In October 2001, Aavishkaar (Hindi for ‘invention’) was launched with the money Rai had raised. It’s now part of the parent company, Aavishkaar-Intellecap Group. Intellecap was founded in 2002. The company identifies investable businesses from underprivileged areas and provides the necessary business training.
Aavishkaar is among the few funds in India dedicated to investing money in businesses and sectors traditional investors do not fancy much. In the 16 years that Aavishkaar has been in operation, it has become a global pioneer in impact investing. It is also the rare investor with an entrepreneurial approach to development.
Aavishkaar has demonstrated that it is possible to get commercial returns from investments across sectors and geographies, including low-income states. Aavishkar’s investments fetch 15 to 20 per cent returns, which is the industry average.
The 50-member team at Aavishkaar has impacted over 70 million lives and created more than 1.5 lakh jobs. It is also the first Indian venture capital fund to foray into the international market, with the launch of Aavishkaar Frontier Fund in South and South East Asia in 2015.
Companies in the fund’s portfolio span across India, Indonesia, Bangladesh and Sri Lanka. Aaviskhar plans to launch operations in Africa next year. In each of their chosen ventures overseas, Aavishkaar will typically look at investments that range between $50,000 and $2 million. Rai and his team are now busy building up for a fund worth $500 million fund.
Aavishkar has so far floated five funds (of which the latest corpus is $200 million) and a portfolio of 50 companies to which it has provided capital and mentorship. They have had 23 exits so far; Rai says at least 35 of the 50 ventures they invest in would bring in returns.
Rai proudly reveals that Stanford Business School uses Aavishkaar as a case study. In July 2017, Intellecap won the Global Impact Market Builder of the Year title at the Global Steering Group of G20 in Chicago. “Aavishkaar wasn’t built by one person, it was built by a thousand people,” says the impact investor.
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