Bangalore: In December 2005, when Anant Kumar set up a hospital offering maternity and childcare services in Hyderabad targeting low-income customers by pricing services at about a quarter of what other hospitals charged, it was an instant success. Set up as a pilot 25-bed facility by a trust run by India’s largest condom maker, Hindustan Latex Ltd, the facility addressed a need that is felt all over India: affordable mother and child healthcare.
Social enterprises: (clockwise from above) Servals Automation’s fuel-conserving kerosene burner being tested at the company’s Chennai facility; Vineet Rai, chief executive officer of Aavishkaar India Micro Venture Capital Fund, a venture fund that invests in start-ups that promote development; and Anant Kumar, chief executive officer of LifeSpring Hospitals (Bharath Sai / Mint).
But when Kumar decided to expand the business—branded LifeSpring—into a chain by replicating the model at Moula Ali, a locality in the Andhra Pradesh capital, and went out in search of capital to back his idea, he kept running into a wall.
He was confident about the LifeSpring business model and scalability of such hospitals and made numerous rounds at banks, financial institutions and venture capital, or VC, firms.
Much to LifeSpring’s disappointment, it found no buyers in this group of investors for its idea. “The returns expectations of these investors were very high. The talks always boiled down to these numbers. They would say your business model is too good to be true. Show us that it can work,” recalls Kumar, chief executive of what is now LifeSpring Hospitals Pvt. Ltd.
Elsewhere, Servals Automation Pvt. Ltd, a Chennai-based firm that made kerosene stoves and burners capable of conserving 30% fuel, was also looking for funds. Working with non-governmental organizations (NGOs) and providing employment to rural youth, mostly women, the firm felt its business model was in place with its stoves finding many takers in the market. The firm was, however, not able to find any investors from banks or the VC fraternity for its social enterprise.
LifeSpring and Servals Automation were what are called social ventures, or enterprises that aim to accomplish social or environmental goals in addition to meeting financial benchmarks. The traditional reaction has been that such ventures under-deliver on financial returns even though they can eventually become self-sustaining.
Both LifeSpring and Servals Automation ultimately found investors, albeit not the typical VC funds. Social venture fund Acumen Fund Advisory Services India Pvt. Ltd, a non-profit venture fund, invested $1.9 million, or Rs9.5 crore, in LifeSpring, forming a 50:50 joint venture with Hindustan Latex, while Aavishkaar India Micro Venture Capital Fund, a venture fund that invests in start-up companies that promote development in rural and semi-urban India, funded Servals Automation with $20,000 in the first round.