With an increase in the number of social enterprises, impact investment is also taking a spotlight in India, with close to a $1 billion waiting to be invested. Jacqueline Novogratz founded Acumen Fund has made investments worth $ 31.9 million in India’s social enterprise sector. We look into the rationale of the investment by Acumen in one of their portfolio companies – Global Easy Water Products (GEWP) – in an interview with the Acumen team.
Edited Excerpts from the interview:
1. What were the driving factors for Acumen behind the decision to invest in GEWP?
Acumen invests in enterprises that can deliver critical goods and services to low-income consumers, become financially sustainable and scale to reach hundreds of thousands or as many as millions of people. We seek investments that will offer breakthrough insights into how we address the gaps in access that exist. GEWP’s scalable and sustainable model, while creating far reaching impact by increasing the income levels of its target customers, is what attracted Acumen to first invest in 2008.
GEWP spun out as a for-profit, social enterprise from IDE-India, a non-profit with 25 years of experience in the development of irrigation technologies and market linkages for smallholder farmers. The company addresses the unmet need of millions of such farmers that have been ignored in the development and distribution of modern agricultural technologies, by providing them with drip and sprinkler irrigation technologies at affordable rates. Farmers using GEWP’s products see their yields increase by as much as 30-50%, and also see their water consumption decrease by 30-50% in the process.
Acumen’s $1m investment was used to increase the network of dealers, finance working capital, and build out the management team. It has helped GEWP sell more than 150,000 systems, across 7 states. GEWP has seen strong growth since the time of Acumen’s investment. The company has developed a wider base of dealers, added new products in its portfolio, and expanded the number of sales agents.
3. Apart from capital, in what other ways does Acumen help in GEWP’s growth?
We recognize that in order to build social enterprises that truly serve the poor, much more than capital is needed. We invest not only philanthropic-backed capital, but also in emerging leaders and have an active Global Fellows program that directly supports many of our investees, who often have difficulty accessing the right talent.
Every year, we select 10 young professionals, from a global pool of applicants, who come armed with training from some of world’s best educational institutions and corporates. These professionals are then placed with some of our portfolio companies for a few quarters, to help address issues critical to the success of the business. Global fellows have supported GEWP in many ways, from helping to improve the quality of its products by incorporating customer feedback and introducing quality control processes to managing expansion to new markets in Kenya.
Separately, we also provide strategic support to the management team at the board level. At GEWP for instance, our Portfolio Manager, Siddharth Tata, is an active Board member and works along with the COO Harish Chandra and the senior management team in defining the company’s business strategy and operating plan. He is also actively involved in recruiting the senior team and bringing in systems for scaling.
4. What are the some of the challenges Acumen has seen in the agriculture sector in India?
Acumen invests in early-stage enterprises in the agriculture sector that have an innovative business model to improve incomes of smallholder farmers. We invest across four major sub sectors within agriculture- agri-inputs, agri-processing, livestock, and enablers.
Within the agribusiness universe, we have seen that the number one challenge faced by early-stage companies is last mile access, i.e. reaching the farmer customer. Building a distribution network requires the right combination of skills and capital and often takes time. We have also learned that smallholder farmers are risk averse and take 2-3 years before they are convinced about a product’s utility before adopting an innovation.
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