‘Ad’venture Capital

‘Ad’venture Capital

“We are a venture capital (VC) fund, and like any other VC, invest in viable businesses,” says Vineet Rai, founder and chief-executive, Aavishkaar. But, what sets Aavishkaar apart is the fact that they invest in businesses that tap rural markets at an early stage. This has won it the sobriquet “Adventure” capital. “We are also perceived as a VC that funds ventures businesses with a social impact. That is an indirect consequence though of being in the rural space,” he adds. The businesses they target help the 70 per cent of India’s population that resides in rural India to participate in the process of economic growth. In fact, the company does not invest in the traditional businesses of information technology and information technology enabled services, but, targets companies that cater to healthcare, education, agriculture and technology for the rural markets.

Taking the plunge

“We started operations in 2001 and it took us five years to raise Rs. 5 crore,” reminisces Rai. With no background in entrepreneurship or rural ventures and even venture capital funds, entering this segment was as good as committing suicide. “I was a good guy doing good work, but that does not mean success,” he points out. Unless there is awareness of the work done, the money does not flow in, he adds. And therefore, promoting the company became critical.

Till now, the company has invested in 27 businesses, of which 22 have been successful and some are even considered fastest growing companies in their segments.

Aavishkaar gained attention by entering competitions and winning several awards. This brought about visibility and the generated interest in the media. “You get questioned, but, you also get talked about,” says Rai. And as a result of being in the news, between 2005 and 2007, the company managed to raise Rs. 150 crore. It was critical to demonstrate that real value can be created by doing real work in the rural segment. One of the differentiating factors of Aavishkaar is that the investor pool is larger and each investor has a long-term focus.  “Short term returns could mean burning out in the long run,” he says.

Choosing wisely

While visibility surely helped the cause, the company had to ensure careful deployment of the money that came in. While choosing a business to invest in, one of the primary criteria is that it must operate in rural India. The business could focus on financial services like micro finance institutions, or be into healthcare, education, agriculture and technology. In either of the cases, the promoters, the core team, their commitment, motivation, experience and sustainability decide the suitability for investment.

Till now, the company has invested in 27 businesses, of which 22 have been successful and some are even considered fastest growing companies in their segments. Some of the companies they have funded include Vortex Engineering that manufactures low cost ATMs; Servals Automation that provides energy solutions for the poor; Shree Kamadhenu Electronics that provides technology for the dairy industry, among others.

Future plans

Looking to the future, Aavishkaar will raise Rs. 1,000 crore this year and plans to raise another Rs. 5000 crore in five years, with 300 investments. The growth strategy is linked to their belief in rural India and the need to enable this segment to contribute to the economic growth of the country. This involves a long-term commitment, and Aavishkaar is here for the long haul.