Aavishkaar India Micro Venture Capital Fund, a venture fund that invests in start-up companies that promote development in rural and semi-urban India, has raised a fresh round of funding to take its fund sizeto $6.1 million or nearlyRs25 crore.
The five-year-old fund, which takes its name from the Hindi word for invention and has already invested $1.3 million in 14 start-up firms, aims to close another round of institutional funding by the year-end that will take its size to$15 million.
Investors who participated in the current round of fund raising include Aavishkaar International, the Singapore-based parent company of Aavishkaar Venture; Cordaid, a Dutch agency; finance firm Enam Holdings; India’s National Bank for Agriculture and Rural Development; and Care Enterprise Partners, a Canadian agency.
Aavishkaar Venture will channel investments from the enhanced fund to start-ups that focus on development of rural businesses such as in rural retail, handicraft and agri-business areas.
“Our deal size will range from Rs10 lakh to Rs2 crore and in the next four years we expect to invest in at least 40 enterprises,” said Vineet Rai, chief executive, Aavishkaar Venture.
Early investments by Aavishkaar Venture fund include those in Vortex Engineering, a manufacturer of automated teller machines used in rural areas, Servals Automation which markets a range of rural technology gadgets such as a micro irrigation device, and Vaatsalya Healthcare, which is setting up a network of rural health-care centres. “Our most recent investment is in Rangsutra, a company of 1,000 rural artisans that markets handicrafts,” said Rai.
The longevity of funds such as Aavishkaar Venture will depend on how they scale up and deploy their corpus, said an expert. “There is a huge momentum that is driving investments into the social venture space in India today but the continuation of that interest will depend on how successful these start-up companies are in raising subsequent rounds of capital,” said C. Venkat Subramanyam, founder and director, Veda Corporate Advisors, an investment bank that structures deals in venture capital and private equity space.
Earlier this year, Sequoia Capital was the lead investor when SKS Microfinance raised $11.5 million as part of its plan to provide microfinance services to over five million poor families by 2010. Other investors in SKS Microfinance include iconic venture investor Vinod Khosla. And in August, the New York-based Acumen Fund, a non-profit venture fund for businesses that address poverty, invested $1.5 million (Rs6.6 crore) in Ziqitza Healthcare Ltd, a Mumbai-based company that provides emergency medical services.
The good news for Aavishkaar (which Rai says has a backlog of 70-80 investment proposals to be vetted) and its peers could be that demand for such capital is on the upswing.
New Ventures India, a firm that helps connect entrepreneurs in the clean technology and renewable energy areas with potential investors, expects to help 20 companies raise funding of $15 million by end-2008.