WATCH: From a cheque of Rs 11,001 to raising Rs 350 crore: how Ankur Capital is betting big on Bharat
Two women working at Xerox Labs hit upon an idea for a novel thermal imaging system that can be used to detect cancer. They buy out the solution to modify and commercialise it as a no-touch, non-invasive solution to diagnose breast cancer. But every startup needs to money to grow.
In farms across India, companies like McCain and BigBasket are using a SaaS-based farm management solution that helps improve crop yield, tracks produce, and delivers smart solutions for agriculture.
Neither of these companies fit the standard internet-driven, consumer-oriented mould that would have investors salivating. What they needed were backers who believed in the potential impact of such solutions in the long term. For Niramai and CropIn, respectively, that came in the form of Ankur Capital, which was among their first investors.
The common investor in both these investments was Ankur Capital, which has been championing businesses that can impact India with technology. The beginning, however, was tough, even though the founders came with rich corporate experience.
It was just five years ago that Ritu Verma and Rema Subramanian, the Founders of Ankur Capital, decided they wanted to set up a for-profit, social impact fund. Convincing investors proved to be far more difficult than they had imagined. They travelled around the country to meet institutions and high net-worth individuals (HNIs), trying to sharing their vision. One potential investor even wrote a cheque for as little as Rs 11,001 because he did not believe that there could be such a thing as a for-profit social impact fund.
“Everyone thought we were an NGO,” recalls Rema Subramanian, Partner at Ankur Capital. But she and Ritu believed that India’s consumption of data through mobile phones could change the socioeconomic dynamics in the country. (This was long before Reliance Jio came into the picture and did exactly that.)
By 2015, Rema and Ritu realised that to find institutional investors, they would have to invest in companies on their own and prove to the world that social impact companies could be successful for-profit businesses too.
When they announced that they were going to invest on their own, a slew of dairy companies reached out to them saying they could fetch better pricing for the farmer for every litre of milk supplied. So, Rema and Ritu travelled to Tamil Nadu to check out the claims of these companies.
What they realised, though, was that this sourcing of milk directly from farmers was already being done by big corporate entities like the Hatsun Group. So they returned to Mumbai and started exploring many more requests. Through common connects, they discovered agritech startup CropIn and ERC Eyecare, which provides eye care for the poor in the North East.
The subsequent investments in these companies and their growth validated their belief in their idea and led Rema and Ritu to launch Ankur Capital in 2016. With the backing of institutions like SIDBI, they closed their first fund of Rs 50 crore.
Since then, Ankur Capital has invested in 14 companies. Besides Niramai, ERC Eyecare, and CropIn, their portfolio includes BigHaat and Skillveri, which have gone to raise Series A funding.
Growing to Rs 350 crore in their second fund
“We look at businesses that can grow and show traction. The business should be viable,” Rema explains.
She substantiates this with the example of one of their investee companies, Agricx, which has built a proprietary software to grade potatoes in warehouses to avoid wastage. The algorithm looks at potatoes in cold storage and predicts the quality of the produce. Today, it can tell the quality of produce in Agra, Ujjain, Indore, Fatehabad, and Firozabad, and evaluate 10 varieties of potatoes.
“This kind of work would not have been possible if not for the domain expertise of the founders. All our founders have domain expertise and use technologies to scale up,” Rema asserts.
Their first fund had a four-year timeline and is still investing. So far, Ankur Capital has seen one exit - with Carmel Organics. It had invested an undisclosed amount in the Madhya Pradesh-based supplier of medicinal herbs in March 2018. Later, the founders bought back their stakes and opted to go the debt funding route. Ankur clocked a 29 percent internal rate of return.
Continuing with its focus on Indian agriculture and healthcare, Ankur Capital is now raising its second round of corpus of Rs 350 crore, which it plans to close by the end of the year. The partners say the fund has made three investments from the new fund, but are yet to announce names.
The companies they have invested in know the importance of investing in sectors where the impact can be huge, but there is a need to be patient.
As Sachin Nandwana, Co-founder of BigHaat, puts it,
“India needs investors that can help startups take technologies to the heartland of India to make an impact in terms of agriculture and healthcare. There is enough business to go after the next half billion people.”
For Ritu and Rema the feeling of giving back to “Bharat”, which is the India away from its cities, is very strong. They met while doing social work in Mumbai and forged a friendship that eventually led to Ankur Capital. Rema has four decades of financial experience, and Ritu is a physicist who eventually became a management professional.
“I believe as networks penetrate deeper in to India there will be several business opportunities that can be enabled with technology and they will be affordable and scalable,” sums up Rema.
The double Rs (Rema and Ritu) represent Risk and Reward. No wonder the duo have taken the best bet in their career: to support Indian for-profit, social impact startups.