Ashish Dhawan exited investment management to set up Central Square Foundation, based on a venture capitalist model, to channel philanthropic funds
New Delhi: Twice in his career, Ashish Dhawan has confounded the expectations of his colleagues. The first time was in 1999, in the month he turned 30, when the MBA from Harvard University decided to quit his job at Goldman Sachs and move back to India to start Chrysalis Capital (now ChrysCapital), a private equity fund that would go on to become one of the success stories of post-liberalization India—it now manages $2.5 billion across six funds.
The second was in 2011, when Dhawan began to plot his exit from investment management to set up Central Square Foundation (CSF), based on a venture capitalist (VC) model, to channel philanthropic funds, work closely with social entrepreneurs and support accountability initiatives, all in the field of education.
He was prepared for the raised eyebrows that met his decision (he eventually exited ChrysCapital in June 2012, four months after CSF was registered as a trust).
“People never thought of philanthropy as a career, even today they don’t," Dhawan says. “When I wrapped up my career at ChrysCapital people would say that I had retired." Dhawan was 43 years old at the time.
“I would say, ‘Listen I am working as hard or harder,’ they were like, ‘How could that be possible?’ They don’t see it as something that could keep you gainfully occupied throughout the day. For most people in the corporate world, philanthropy is still something you do when you retire. It’s not thought of as a proper career."
Dhawan is betting this will change, and he isn’t the only one. In its Indian Philanthropy Report of 2013, Bain and Co. suggested that the need for philanthropy in the country is greater than ever this year, after a decline in economic growth. But the act of giving must be targeted in a more impactful way, the report said.
“Ahead of the twin challenges of increased need and expected resource constraints, it is more vital than ever to improve the definitions of and the expectations for philanthropic impact. More accountability and communication between stakeholders will stretch and direct the donations to accomplish more," the report said
The issue of how to target philanthropic funds and create maximum impact were at the forefront of Dhawan’s mind when he, along with Azad Oommen (who is now executive director of CSF) and senior adviser Tom Haslett (an expert in philanthropy and impact investment in the US and Africa) began to plan the philanthropic venture in 2011.
Their backgrounds in private equity and the business world were directly applied in these conversations, Dhawan says. “We wanted to think on a systemic level, and there were two approaches, one was to be a purely philanthropic VC model, which lends itself to skills from the past because I used to select entrepreneurs, work with them, ideate strategies. I thought that was a space we could claim," he says.
Applying the same rules they had for entrepreneurs to smaller non-governmental organizations (NGOs) seemed like a reasonable leap to Dhawan, and one that was needed. “Most philanthropic capital at least in India is either from people who run their own foundations, like the Azim Premji Foundation, Shiv Nadar Foundation or people who give out money as a grant and will typically do it at a late stage, when an organization is already up and running, so it’s somewhat risk-averse."
The vacuum that Dhawan and his colleagues saw in the market was at the seed stage; working hands-on with social entrepreneurs.
There was also a second string to CSF’s bow, Dhawan says. From an early stage the team, perceiving a shortfall in the arena of research and advocacy, was keen to look into the policy side of development also. “Frankly, with our VC portfolio, at the end of the day there is only so much scale you can get, without it. If you prove something works and get a relationship with the government you can package that information together as a form of research. So these were our two ideas, to be a VC and a think-tank under one roof."
Haslett summed the idea up another way. “Social change happens when your top-down and bottom-up approaches coincide; absent that, we are just pouring money in a black hole."
CSF’s ambit might seem broad, but in other ways it is very specific, says Dhaval Udani of Give India. “Unlike Dasra, which would fall into the same space because they are a nurturing organization too, CSF is very focused on education, so in that way Ashish can do whatever he wants within the sector," Udani said. Dasra is a philanthropy foundation.
In fact, CSF looks at four verticals in its VC side: schools, teacher and principal training, education technology and accountability/community engagement. Dhawan is not as concerned with building bricks and mortar structures or levels of enrolment as with creating what he calls “models of excellence" in the sector of affordable schools that cost less than ₹ 1,000-1,200 per student per month.
“There are no models of excellence in that universe," he says. “There’s plenty of infrastructure out there, let’s find a way to leverage existing brick and mortar, similar to a charter model, where you control the school, the teachers, the principals, the hiring, the curriculum. If you can do it well you bring about that policy change."
These ideas didn’t arrive out of the blue. Dhawan has always been interested in models of education, he says, since his own school days. His father worked for Dunlop—a British company headquartered in Kolkata, and Dhawan went to school there. At high school, his principal organized for his classmates to help out by teaching class 7 students for half a day.
“I loved it, it was really fun." says Dhawan, “I went running back to Mum and said, ‘I want to be a teacher,’ and she kind of brushed it aside. My dad was a corporate guy and I was on that career track, but that bug was always in me after that."
Instead of becoming a teacher, Dhawan went to the US and graduated magna cum laude in economics and applied maths from Yale in 1992. Like many of his classmates, he went straight to Wall Street, landing a job in a “small but pretty hot" investment bank called Wasserstein Perella.
“I had a very plum job after college, and I had to pay off some debts as well," he says. “For me money was important, lots of people in my class went off to do non-profit work—Teach for America was a young organization at the time, but you had to be American. I probably wouldn’t have had the gumption to do it then."
Dhawan did, however, work on the side at a school in Harlem and later a school for gifted but underprivileged kids on the Upper West Side of Manhattan, which left him with an admiration for the notion of charter schools. It wasn’t until he went to Harvard Business School, whence he graduated in 1997, that Dhawan says he had the “chance to introspect. I set a goal that at age 30 I wanted to become an entrepreneur, but I also said that if I do well I will give up my corporate career at age 45 and focus on social inclusion and education."
As it turned out, Dhawan’s career followed a path remarkably similar to the one he planned, though he admits that there were coincidences that helped him along the way.
The first of these serendipitous moments came at the end of the 1990s, when Dhawan decided to make the first of his moves—back to India and to start Chrysalis
“There was a nascent market in private equity back then," he says. “It’s the same thing now, we had to be very nimble with our strategy. With ChrysCapital we changed our strategy two or three times over the first few years because we were learning on the fly."
Having started with both venture and growth funding, the team eventually settled on growth, migrating from generic investments to a more sector-focused approach, he says.
“We only invested in private companies earlier but eventually we realized we had to (be) public and private and we did much more public eventually because we realized there was more opportunity there."
With CSF, Dhawan predicts the same thing will happen, “the approach is similar", he says, “the metrics, the strategy the relationships; the difference is that in the corporate world you have a gazillion opportunities to choose from, here you have to create them, the ecosystem of entrepreneurship is not well formed".
Another difference between the corporate and philanthropy worlds, says Dhawan, is the comparative paucity of forums for information exchange in the latter. “We aren’t as well formed to fight for policy change (in the philanthropic community)," he says. “The corporate world has Ficci and CII and all these organizations that are lobbying on behalf of the corporates; here Pratham will be lobbying for one thing and Azim Premji for another, but there isn’t as much of a coherent putting it all together. Everyone is focused on their own domain instead of the common cause."
Ficci is short for the Federation of Indian Chambers of Commerce and Industry. CII stands for the Confederation of Indian Industry. Pratham is an NGO working to provide education to underprivileged children.
This point was echoed by Bain in the conclusion of its philanthropy report 2013. “Bain believes that the philanthropic ecosystem, comprised of donors, foundations, NGOs and the government, needs to come together on the issue of impact definition," the report said.
The combination of on-the-ground action and policy research may be one way of addressing these hurdles, according to CSF. For example, CSF works with the Akanksha Foundation, which runs 15 schools in partnership with municipalities in Mumbai and Pune, to leverage public infrastructure. It also seed-funded a new non-profit school called 3.2.1, run by a young social entrepreneur, Gaurav Singh.
“With those two examples, a group of us led by (consulting firm) McKinsey (& Co.) created a public-private-partnership framework for Bombay and then pitched that to the municipality and they finally accepted it, signed it and it was eventually passed by the house. That’s an example of being active on the ground to show that something is working and then to translate it to actual policy," Dhawan says. “Execution is not our job. It’s like in the private equity business. What do I know about pharmaceuticals or financial services? But I backed those companies because the entrepreneur was the one who knew how to run it."
Among the other ventures that have so far received funding are the five Mindspark learning centres in Delhi that serve over 400 children, as well as The India School Leadership Institute, co- funded with a group of international foundations.
Personally, Dhawan makes a convincing first impression, say people who have worked with him in the past.
“I first met Ashish when he came to India, it was the time when he was trying to set up ChrysCapital," says Pramath Sinha, founding dean of the Indian School of Business-Hyderabad and co-founder of the Ashoka University (focused on liberal arts education, a significant gap in India), which Dhawan has part funded. “My impression was that he was somewhat determined yet tentative person. You know India is a tough market. But the Ashish Dhawan of today is an amazing person. Generally you find bankers full of edges, not humble, but Ashish is different. He built a great business in a tough environment and perhaps (is one of the) most thoughtful people I have met in professional sphere."
Pramod Maheshwari, CEO of Career Point Ltd, which prepares students for competitive examinations, agrees: “As a professional he has an extraordinary capability to understand different businesses and its prospect. That’s why he made good returns from his funds at ChrysCapital."
It may also be the reason why the transition from private equity to philanthropy has been a fairly smooth one. The offices of CSF run very much like a start-up. The staff of 15 (its goal is not to go beyond 20) has flexible working hours and is small enough for Dhawan to host them for breakfast meetings at his house near Lodhi Gardens in Delhi.
CSF is still in its infancy, Dhawan insists. “It takes 10 years to do anything meaningful but I’m committed to doing this for at least the next decade and there’s always luck involved—it’s better to be lucky than be smart." If that sounds disingenuous coming from someone who has made a lot of smart moves over his career, Dhawan maintains the necessary scepticism of a venture capitalist with the optimism of a philanthropist. The idea of failure is built into his model.
Of the projects CSF has begun so far he says, “In year one we did four and our goal is to have about 20-25 ventures in five years. Will all of them go to scale? No. It’s a VC approach so if something’s not working then why not just cull it." Then he relents slightly, “You do need a slightly more humane approach with this. You can be hard-nosed but you have to have a soft underbelly as well."
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