Three years ago when we first started looking for money, we had only social venture funds interested in us; now, in the last month, I have got calls from mainstream venture capital funds who are interested in investing,” says Ashwin Naik, founder of Vaatsalya Healthcare Solutions Pvt. Ltd, a start-up that is building a chain of low-cost hospitals in rural and semi-urban India.
Sustainable model: Reshma Anand (in the foreground), founder and CEO, Earthy Goods and Services, says she wasn’t trying so much to set up a social enterprise as to find out how economic activity could help support livelihood in rural areas. Harikrishna Katragadda / Mint
That perhaps indicates how far for-profit social enterprises have travelled in the last few years to be recognized as viable business models. The low-cost hospital model has proved to be a magnet for investors who have backed Naik’s start-up with Rs27 crore of venture capital financing in just three years. “There is always a social element to any new enterprise, but what we are now able to do is to turn these ideas into profitable and sustainable businesses as well”, says Naik, a doctor by profession who now has a chain of seven hospitals across Karnataka’s hinterland towns.
Naik’s success with the for-profit model is being replicated across the country. The for-profit model, as opposed to profit maximization, seeks returns on investment measured in part by the difference the enterprise makes to the life of a consumer. At least 300 investors and entrepreneurs gathered in Mumbai at the end of April to felicitate the country’s most innovative social enterprises.
Fifteen enterprises, out of 50 finalists, were nominated as winners in five categories—education, healthcare, clean energy and environment, agriculture and rural innovation and employment generation. The event, called Sankalp (pledge) 2009, “aspires to become the equivalent of the World Economic Forum, where people interested in sustainable social and environmental development can set the tone for what is to come,” says Pawan Mehra, co-founder, Intellectual Capital Advisory Services Pvt. Ltd, or Intellecap, an advisory firm in the social enterprise space that co-hosted the event.
Risk-reward formula: IFMR Trust’s Bindu Ananth says entrepreneurs in the social sector typically lose out on large chunks of their equity ownership in the search for capital. Arjoon Manohar / Mint
The awards event was also the venue for the launch of the South Asia Impact Investing Forum, an initiative of the Global Impact Investing Network, or GIIN, a 750-strong group of investors who represent some of the world’s largest institutions that fund projects in the social sector. Industry watchers say there are four crucial reasons why the social enterprise sector is getting worldwide attention.