Investing at the Bottom of the Pyramid

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Investing at the Bottom of the Pyramid Micro
venture capital for Sustainable businesses
Aavishkaar India Micro Venture Fund
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Entrepreneurial Opportunities..

• Entrepreneurial interventions do have the
  potential to impact the bottom of the pyramid but
  the intervention strategies vary based on
  approach, choice and the scale of intervention.
• Business Expansion in Rural Markets
• Business Intervention for Social Change
• Social Sustainable Enterprise

Large Corporate
Micro Equity Provisions
Donor Funded
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BOP Opportunities

• Rural Products enterprises in the area of
  handicrafts, agri products, dairy, renewable
  energy for rural electrification, medicinal
  herbs based products and many more.
• Social Technology initiative such as N-Logue
  (WLL), Drishtee (e-governance), Vortex (rural
  ATM), CK Shakti (Local Language Software)
• Financial Innovation based interventions such as
  Microfinance

Replication and scale require risk capital with
equity feature!!
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Why Venture Capital?

Initial Idea, Business Formation
Larger Sustainable Enterprise
Business Growth
Maturing Business

• Entrepreneur conceives idea
• Often a small proprietorship
• Generally micro or sub-micro in size
• Entrepreneur works with team

• Business plan to grow business past micro stage
• Requires more infrastructure, addition of new
  products and services
• Increase in headcount
• Aavishkaar provides financial support
• Aavishkaar provides business building support

• Business growth slows
• Focus on profit and efficiency
• Aavishkaar provides strategic and operational
  support

• Business enters small stage
• Pursues growth opportunities to get to medium and
  large size
• Other investors join

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Why Venture Capital?

To meet regulatory capital needs and growth needs
Start up
Growth
Maturity
The equity Gap
Conventional Venture Capital (Not interested in
BOP)
Private Equity /IPO/ Institutional Investors (Not
Interested in BOP)
?
Aavishkaar Focus
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Aavishkaar Micro venture Capital
Investment Thesis

• AIMVCF seeks to achieve sustainable development
  in India by
• Investing in innovation and appropriate
  technology driven Small Micro enterprises that
  are
• socially relevant
• environmentally friendly
• commercially viable
• and have little or no access to established
  financial institutions for risk or collateral
  free loans/Equity
• Achieve Socio-commercial returns for its global
  investors

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Four Tier Evaluation Process

• Evaluation concentrates on Rural Applicability,
  social relevance and presence of a organized
• business model.
• Focus to understand the motivations of the
  Entrepreneur, his ability to lead, integrity,
  honesty commitment to the project along with
  social benefits.
• Business evaluated on commercial
  parameters such as markets, scalability,
  uniqueness of business model, growth, return on
  investment.
• Term Sheet, Audit and Legal Due Diligence

Decision made by Chief Executive based on the
recommendation of the Project Manager Decision
taken by the management board to accept or reject
the proposal Decision by the Management board on
investment, size and valuation based on the
recommendation of the Executive
team Investment made based on the
recommendation of the Auditor
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Servals Automation Private Ltd
Aavishkaar Portfolio
Servals is an appropriate technology provider
for rural India. The company has two products an
energy efficient kerosene burner and a rain gun
irrigation device. Both products were designed
by rural innovators. Servals currently has 7
employees and is located in Chennai.

• Kerosene stove burners 70000 sold
• Sold burners will save customers in aggregate US
  500,000 during their useful life (1 year)
  government fuel import burden also reduced by
  same amount assumes Rs. 100 kerosene expense per
  household per month, reduced by 20
  conservatively)
• Rain gun 170 sold
• A micro-irrigation device, also called an
  overhead sprinkler. The rain gun produces an
  artificial rain by throwing out water to a
  distance of up to 90 feet with a 360 degree
  rotation facility
• The size of the drops, the quantity of water
  released and distance are such that it provides
  optimum irrigation to many crops while saving
  water otherwise wasted through flood irrigation

Rain Gun
Kerosene Burner
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SERVALS
Impact of Micro equity Provisions
BUSINESS MODEL

Original Stove Manufacturers
Orders
Burner Retailers
NGOs
Direct Demos and Periodic visits
SHGs
SERVALS AUTOMATION
Layered Incentive Scheme
Supply
Manufacture
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SERVALS Commercial Social Result
Aavishkaar Investment
Equity investment of US 26,444. Rigorous hand
holding support over three years by Aavishkaar
Micro Equity Fund
Social Parameters Relationship with 10 large
NGOs, also supplied burners to service
distressed victims in Tsunami. Won the
International award of maximum fuel efficiency by
Paraffin Safety Association of South Africa
Serving the Bottom of the Pyramid Profitably
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Aavishkaar Portfolio Cont..
Shri Kamdhenu Electronics Private Limited (SKEPL)

• Company Overview
• SKEPL pioneered the automation of the milk
  collection process at dairy cooperatives. The
  system introduces transparency and efficiency and
  helps improve cooperative management. SKEPL has
  32 employees and is located in Anand, Gujarat.
• Social value
• SKEPL products improve the operations of milk
  cooperatives, an effective business structure
  utilized throughout Indias dairy industry.
  Cooperatives using SKEPLs technology are more
  profitable, improving the livelihoods of their
  members.

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SKEPL
Impact of Micro equity Provisions
BUSINESS MODEL

Milk Unions
Milk Cooperative
Orders
Marketing effort with Dealers and Sales Team
SKEPL
Assembling Supply
Outsource Parts
Foreign Imports
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SKEPL Commercial Social Result
Aavishkaar Investment
Equity investment of US 44,000. Rigorous hand
holding support over two years by Aavishkaar
Micro Equity Fund
Social Parameters Outreach with 600 Unions and
co-operatives in Gujarat. Expanding to
Maharashtra, MP Rajasthan.Recently won Manthan
Award for best e-content practices in e-business
category
Serving the Bottom of the Pyramid Profitably
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Aavishkaar portfolio contd
Craftsbridge (I) Private Limited
Company Overview Craftsbridge is a design and
marketing outfit with an outsourced production
model in the area of Indian handicrafts. The
companys mission is to design and market
handicraft idea worldwide and generate
sustainable income for talented but economically
challenged artisans from India.
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Craftsbridge
Impact of Micro equity Provisions
BUSINESS MODEL
International markets

Corporate Buyers
Orders
NGO Facilitator
Marketing effort with Designer samples
Craftsbridge
Production Supply
Outsource Production
Rural Handicrafts Producer
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Craftsbridge Commercial Social Result
Aavishkaar Investment
400 commercial growth achieved by investing
equity of US 100,000. Rigorous hand holding
support over two years by Aavishkaar Micro Equity
Fund
Social Parameters Outreach with 13 NGO 100
Craftsmen. Very small individual businesses in
handicrafts are also part of Craftsbridge supply
Chain.
Serving the Bottom of the Pyramid Profitably
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Tide Technocrats Private Limited
Company Overview Tide Technocrats operates in the
space of Rural Energy Solutions. TTPL provides
end to end solutions for micro hydel
installations and the alternative fuel needs for
the power plants. It aims to provide
electrification in rural and far flung remote
areas where bio mass creates avenues of
employment.
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Tide Technocrats
Impact of Micro equity Provisions
BUSINESS MODEL

ELC Vendors
Turbine Vendors
Biomass Customers
TTPL
Direct Selling Agents
Coordinators
Coffee Plantations
Coconut Farmers
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Tide Technocrats
Impact of Micro equity Provisions
Recent Updates
Aavishkaar has partly divested its stake and has
made a partial exit from TTPL. Aavishkaar has
also found a Long Term Strategic Investor (Velcan
Energy, France) for TTPL.
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Aavishkaar portfolio contd
Net Systems Informatics (I) Private Limited
Company Overview Net Systems (I) Private Limited
is a company based in Mumbai, aims to create
disabled friendly IT infrastructure. It enables
software and websites for the use of disabled,
particularly those with vision and auditory
impairment. The company also provides Technical
Writing outsourcing services. Social
value N-Syst is trying to open up a world of
opportunities for the disabled by making IT
infrastructure compatible to their usage.
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N-Syst
Impact of Micro equity Provisions
BUSINESS MODEL

ITCOMPANIES (INTERNATIONAL)
IT Companies (Domestic)
Order Assignments
Marketing efforts with Direct approach, Seminars
Workshops
Net Systems
Testing
Technical Writing
Accessibility
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N-Syst Commercial Social Result
Aavishkaar Investment
45 commercial growth achieved by investing
equity of US 40,000 in six months. Rigorous
hand holding support over six months by
Aavishkaar Micro Equity Fund
Social Parameters Concentrated efforts towards
increasing Accessibility awareness
Serving the Bottom of the Pyramid Profitably
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Aavishkaars New Investment
Naveen Gram Agrotechnologies Private Limited

• Company Overview
• Naveen Gram Agrotechnologies Private Limited is a
  start up company, based in Rajasthan which
  addresses and provides solutions for the
  challenges of awareness, availability and
  acceptability faced by small enterprises. It aims
  to make an impact in the rural sector through
  development of a distribution and marketing
  channel for rural products by tying up with
  innovative manufacturers.
• Social value
• Naveen Gram concentrates its efforts towards up
  gradation of rural processes through introduction
  of technology.

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Aavishkaars New Investment
Naveen Gram Agrotechnologies Private Limited
BUSINESS MODEL

Agricultural and Rural demand for Technology
Demand
Marketing efforts with Demonstrations and Direct
Efforts
Brand Introduction
Naveen Gram
Dealers
Outsource Technology
Small Enterprises with Innovative Products and
Technology for Rural
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Aavishkaar support goes well beyond funding
Portfolio Company
Aavishkaar Efforts
Servals

• Introductions to customers within Aavishkaars
  network of NGOs
• Continued strategic assistance

SKEPL

• Continued efforts to improve financial
  discipline
• Assisting in MIS system development
• Using Aavishkaar network for business
  development

Craftsbridge

• Restructured financial management, MIS
• Advised on new sales force compensation plan
• Providing export expansion advice
• Using Aavishkaar network for business development

TIDE

• New promoter found
• Company restructured
• Aavishkaar sourced customer contracts
• Using Aavishkaar network for business development

The funded companies now use TALLY, the
accounting software, to manage their accounts and
produce timely financial statements.
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Projects In Pipeline
Pipeline Projects
Reason for Existence
C K Technologies Private Limited

• Based in Chennai
• Prepares Multilingual Software

Vaatsalya Healthcare Solutions Private Limited

• Based in Bangalore
• Provides Rural Healthcare Solutions

Dorgen Agro Bio Technology Private Limited

• Based in Chennai
• Operates in space of Food Processing (Banana
  Based
• Products)

Vortex Engineering Private Limited

• Based In Chennai
• Manufactures Rural ATMs

Farmers Trading Company

• Based In Hyderabad
• Operates in sector of Organic Cotton

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Potential Exit Strategy
Social Investor with Local Focus
Long term loan/ Fresh EQUITY /
Promoter Buy Back
Stable Micro Enterprise with a sustainable model
? Venture Capitalist
Exit Design through Take out financing
Micro Venture Capitalist
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Some Facts..

• Aavishkaar has made six investments in last
  three years and is in the final stages of
  disbursing the seventh investment.
• Aavishkaar has raised a corpus of Us 1.3
  Million and is working on raising it to US 5
  Million.
• The Fund is expected to make return in the
  range of 4-6 on an IRR basis by 2010.
• The fund has already invested over INR 164
  lakhs (USD172,000) with another disbursal of
  Rupees 50 lakhs (USD 110,000) approved and a near
  term pipeline of another Rs 93 lakhs (USD215,000)
  and a long term pipeline of USD 500,000of
  probable investment. The fund current corpus
  would be fully invested by march 2006.

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Investment Sectors Focus

• Agri Processing, Contract farming
• Technology intervention for improved outreach and
  access
• Innovative Microfinance Start up
• Renewable Energy
• Handicrafts

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Attracting Large Investors

• With increased momentum in Microfinance in
  recent years, Aavishkaar has attracted new
  large investors towards making equity investments
  in small enterprises and MFIs.
• The venture capital fund is in the process of
  entering into agreements with some major players
  of the industry.
• Aavishkaar is known for its rigid investment
  criteria and due diligence process in its space.
• With its strategies and management support, it
  has been successful in turning around its
  investee companies

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Management Oversight
Board of Trustees() Mr. Arun Diaz MBA, 28 Years
Banking Experience Mr. Nilesh Mehta MBA, Partner
Infinity Venture Management Board() Dr.
Anantha Nageswaran Ph.D, MBA, Director, Global
Economics and Asset Allocation, Credit Suisse,
Asia-Pacific Mr. Arun Diaz MBA Ms. Jennifer
Meehan Microfinance Social Investing
professional, formerly with The Chase
Manhattan Bank Prof. Krithivasan Ramamritham
PhD, Prof. Head Kanwal Rekhi School of IT
(IIT Mumbai) Mr. Nilesh Mehta MBA Mr. Pravin
Gandhi Partner, Infinity Ventures Sushant Gupta
MBA, Entrepreneur Sameer Wagle Orion
Capital Management Mr. Vineet Rai, CEO MBA,
Ashoka Fellow Mr. P. Pradeep, Project Officer
MBA, former Deputy Finance Manager Agricultural
Company Mr. Priyank Jain, Junior Associate MBA,
B.E.
Advisory Board
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Contact

• Mr. Vineet Rai, CEO
• AIMVCF
• Unit 201 221, Atlanta Estate,
• Dr. Ambedkar Chowk, Off Western Expressway,
• Goregaon (E), Mumbai
• INDIA 400 063.
• Phone [phone]
• Mobile [phone]
• Email vineet_rai_at_aavishkaar.org
• Website. www.aavishkaar.org