SOCIAL ENTREPRENEUR SPECIAL …Where are the ENTREPRENEURS?

SOCIAL ENTREPRENEUR SPECIAL …Where are the ENTREPRENEURS?



Of the $1.6 billion invested in Indian social enterprises, 70% is in financial inclusion.

And 67% of what went into other sectors went into just 15 enterprises.

What is holding back the social entrepreneur ?

Ramasubbu Shankar, given his ordnance factories background, likes to cite the works of Lieutenant General Mikhail Kalashnikov, who developed the versatile AK-47 series of assault rifles. Just like the late Russian officer, Shankar, with just an engineering diploma, revels in tinkering. He doesn't possess strong academic credentials but betrays an intuitive hold on engineering from his decades of hands-on work in defence-related technologies.

“You know why Kalashnikov could do it? Because he was a soldier,“ says Shankar, implying researchers in fancy labs are far removed from the needs of those on the field. Shankar, therefore quit the ordnance services a couple of years ago to pursue his dreams of “designing something which would benefit society and rural India“ and quickly realised he had no clue on how and where to start.

He soon receded into doing contract jobs in automation for companies in Chennai, leaving weekends for his tinkering. The money was good but he was restive. “I was running an engineering paan shop,“ he says, till someone pointed him to Villgro, a Chennai-based incubator for social entrepreneurs.

After several rounds of interviews, Villgro decided to have him as entrepreneur-in-residence, a relatively new, yearlong programme aimed at innovators with nothing but an idea in their heads.
“We are now focused on the ideas stage; we want to build a pipeline of entrepreneurs,“ explains Mukesh Sharma, chief investment officer, Villgro, alluding to a challenge that straddles the impact investing and social enterprise space.

Waiting for the arrival of savvy entrepreneurs with a promising product or service, a good team, a business model, and ready to absorb a million dollars in investments for starters is futile. It's not happening.

An April 2014 study by Intellecap, a strategy advisory firm, highlights the gravity of the situation. Of the $1.6 billion invested in social enterprises since 2000, around 70% was in the financial inclusion space (both microfinance and non-microfinance). Of the investments that went into other sectors--including agriculture, energy, education, healthcare and livelihoods--about 67% was in just 15 enterprises.

Financial inclusion does require large doses of capital because of the very nature of the business. But the fact also is, even as investors begin to transition from microfinance, which has had it heydays, too much money is chasing too few entrepreneurs.

This is where people like Shankar begin to matter. People like him have to prised or coaxed out of the woodwork, and nurtured. Till he engaged with Villgro, he didn't even know what an incubator was and is still tickled by the concept. “They are paying me for building my own business and also developing a prototype,“ he says.

A confident businessman in the making, he is now tweaking CAD (computeraided design models) for an audacious shot at addressing the `missing link' in energy--an attempt to do away with batteries as storage devices. He is working on compressedair energy storage (CAES) for micro-grids. But till he found his way to Villgro, Shankar symbolised the one big question that bedevils the impact sector today: where are the bankable social entrepreneurs and what's holding them back?
Systems And Design A Vijayasimha, co-founder and CEO of OneBreath, which is preparing to launch low-cost ventilators globally, lays his bet on those in their 50s, his peer group. “They have empathy for the underprivileged,“ he says. “Youngsters are yet to develop this caring attitude.“

In the recent past, Vijayasimha has engaged with industry lobby group Ficci and also academia to bring together seniors from varying backgrounds into innovation sand-boxes, prodding them into mind-expanding exercises, to brainstorm on challenges, solutions.
What is needed is more of this.

He would like to see some sort of a flowing, institutionalised way of unlocking all the science vested in individuals, and channelling them into companies and products. A quick scan at some of the emerging early-stage social enterprises that hold promise proves Vijayasimha is indeed right about the empathy bit; he, Shankar, and GNS Reddy can be a triumvirate.

GNS Reddy, managing director of Akshayakalpa Farms and Foods, formerly with BAIF, one of India's largest NGOs, took voluntary retirement in 2012 to try and answer a question: can we make agriculture entrepreneurial? He often wonders why the owner of a paan shop in the city, with a 3 feet by 3 feet set up, earns more than a farmer with three acres of land. For him, it's a systems and design issue.

Reddy is creating a decentralised, hub-and-spoke dairy cluster in Tiptur, Karnataka, which is different from what he describes as the “milk mopping up“ models of an Amul or a Nestle.
Akshayakalpa farmers own the dairy units, while Reddy helps build their capacities on organic farming and herd management. He extends them technologies, developed in-house, to generate on-farm power from biogas plants.
He installs milk-chillers and automated milking systems. And finally, he buys their milk, processes it and distributes it in Bangalore.

Vasant Kumar, who earned Rs 12,000 at a Bangalore factory, is now back in his village earning over Rs 30,000 a month from his dairy. “I am now with my family and without the stress of city living,“ he says.

Reddy insists a 5-acre farm with 25 cows, in a rain-fed area, can easily earn over Rs 50,000 a month. He is aiming at a 300 dairy units cluster in Tiptur before he moves on to proliferate more. He is also designing a model for small farmers with one acre holdings and also exploring the offer of equity to farmers in the holding company at a later stage.
Credit Availability The second category of entrepreneurs the impact sector is banking on is midcareer professionals or those with an earlier brush in entrepreneurship. The IT types pushing new apps as revolutionary abound, but those with a social mien are rare.

Sabarinath Nair, co-founder and CEO of Chennai-based Skillveri Training Solutions, is looking to address the severe skills gap with a welding training simulator that simulates every aspect of welding, complete with light and sound, minus the smoke. While its utility to manufacturing units and training institutes is a given, Nair is now battling mindsets by taking his simulator to the rural hinterland and demonstrating it to parents and their wards. “The idea is to enhance the aspirational value of welding among unemployed youth,“ he says.

KR Karthic, co-founder of Surya PowerMagic, a Coimbatore-based manufacturer of solar water pumps for irrigation, is also engaged in building a favourable ecosystem. Rural-focused entrepreneurship is extremely difficult.
Assumptions often evaporate in the heat and grind of peculiar rural dynamics.
Karthic, for instance, hoped to sell over 100 solar systems a month. He was doing one a month! It shattered him. “The biggest barrier between us and the farmer, we soon realised, was access to credit,“ he says. Cracking it took time and ingenuity. After exhausting early solar adopters like Thangamuthu, a flowers farmer from Nachalur village in Trichy who spent Rs 2.5 lakh on diesel for his Sabarinath Nair SKILLVERI TRAINING SOLUTIONS Wants to address the skills gap with a welding training simulator that simulates every aspect of welding, complete with light and sound, minus the smoke. Nair is battling mindsets when he demonstrates the simulator and aims to enhance the aspirational value of welding among rural youth pumpsets a year, Karthic banked on farmers affiliated to sugar factories to sell his systems.

He chose this set as he knew factories provided finance linkages to farmers they bought cane from. At the same time, Karthic understood there was nothing in his solar pumps for the factories. He has now turned the entire initiative on its head. He scours the Cauvery belt for farmers who leave their land fallow, not growing anything or growing a single crop, due to power scarcity. He then approaches factories with an assuring line: “I have a farmer who wants to give you cane.“ It has changed the nature of the engagement altogether.

Cane shortage is serious across the belt. EID Parry alone needs 45,000 acres of sugarcane next year to bridge its deficit. As cane suppliers to such factories, access to credit for solar systems turns into a virtual non-issue for farmers. “In rural India, we have to go out with the assumption that what we are doing is wrong, and that there is always a better way,“ explains Karthic.

The credit issue is also haunting Reddy. His company has had to extend temporary loans of Rs 1 lakh to Rs 5 lakh to farmers to set up their dairy units so that they develop revenue streams, pay off old crop loans and turn creditworthy in the books of banks once again. This is something he hadn't reckoned.
Mentoring At The Roots Even innovators in education, with fairly tried-and-tested models, have had to trudge difficult paths. Krishna Srinivasan, chairman and founder of Everest Edusys & Solutions and a Silicon Valley serial entrepreneur, wants to take the education effort to the next level and focus on learning outcomes.

Srinivasan is working with government schools, and is changing how science is taught through the use of learning exhibits and aids. He is bringing dynamic content into the classroom. “I would like to take the average student and make him smart,“ he says. And it's showing in the maiden survey conducted by the education department of the Chennai Corporation. Teaching effectiveness and learning efficiency has increased by 48% between term 1 and term 2 in schools under the Everest tutelage.

This bunch of professionals--Nair, Karthic and Srinivasan--form a category in their background and approach to issues, but what is interesting is a fascinating turn in the search for the ever-elusive social entrepreneur. “We are now trying to identify non-English speaking, non-PowerPoint types; those who live in rural communities, understand the context, and have thought about the betterment of their communities,“ says Surabhi Rajagopal, principal analyst, Selco Foundation.

It plugs into Selco founder Harish Hande's strategic decision to not scale up his enterprise beyond Karnataka. His new incubation centre, focused on solar, seeks to identify and mentor small entrepreneurs from underserved regions in central and eastern India, and pass on all his learnings, especially those from the failures of his 16 years and 150,000 installations in solar home-lighting systems.

Villgro is doing something similar. It is expanding its reach into tier-II and tierIII cities. Last year, it held conventions in Ranchi, Lucknow, Bhubaneshwar, Pune and Hyderabad, and plans to expand further into towns where, as Michelle Abraham, leading the initiative says, “there is no buzz around social entrepreneurship“. The initial feedback is encouraging. “Small town people are clearly more empathetic to bottom-ofthe-pyramid issues,“ she says. Patient Capital While incubators, a small band of entrepreneurs, mentors, angels and organisations like Dasra, the Ennovent Network and Intellecap are keen to expand the tribe by fostering the right environment for entrepreneurs to rise and shine, more is expected from one particular community: investors.

Paul Basil, founder and CEO of Villgro, would like a tighter engagement of investors with incubators. “If, for example, a $100 million fund is being raised, a mandate from limited partners for deploying a couple of millions towards fostering an entrepreneurial culture is not entirely unthinkable,“ says Basil.

Vishal Mehta, co-founder of Lok Capital, which is now veering towards non-microfinance investments, doesn't think it's easy given the way funds are structured. “We just don't have the elbow room for building ecosystems,“ he admits, and would like to leave that task, and that of taking first-loss position, to philanthropic capital. In April, Lok exited from RuralShores, its first nonmicrofinance investment and India's first rural BPO, with a six-fold return.

Mehta suggests maybe it's time to explore new models of attracting patient capital, pooling it together and deploying it for the long-term in social enterprises. “Do we need an `open holding company' structure?“ he asks.

Today's impact funds largely follow the model put forth by the VC and PE industry. They have to return money to investors within a set timeline, which means liquidating their portfolio even before long-gestation companies have had the time to gather roots and mature. A holding company structure does away with inadequacies in the present system.
ProCredit, which operates in Europe and Latin America, is often cited as a worthy experiment in open structures.
The road to finding social entrepreneurs flows through innovations like these.
Naren Karunakaran ET140515