The Exchanges

Q And, uh, uh, impact investing. How, how do you give returns to LPs? That's like, uh, uh, when, whenever anyone thinks of impact, they're thinking of creating a good social cause, but, but. Does it give the same kind of returns which LPs expect from VCs in the range of 15 to 20% IRR?

A Sure. So that, see, I think that's where the difference is, right? So as I said, we invest on a very strong and sound theses. And, uh, you know, people have labeled us as impact investors and, you know, different people have different connotation to impact investing, but for us to continuously, uh, raise funds, we definitely have to give returns and people are not forgiving when it comes to financial returns. Yes. Uh, we do focus on, uh, a lot of the, uh, uh, you know, SDGs, the sustainable development goals. Uh, but we continue to be one of the better performing funds, uh, from India. Uh, so as I mentioned, you know, uh, you made about 69 investments and we're probably one of the few funds in India who have made as many exits as we have. Uh, and, uh, we are also in terms of returns, uh, we stand to at close to three X, uh, uh, MOIC on the realized investments. And we clock, uh, approximately 25% in terms of IRR as well. So, uh, you know, I don't think returns can be compromised just because we are called impact investors. And, uh, I'm, I'm sure that's true for any kind of, um, PCS-based investing funds.

AI assessment note: “we clock, approximately 25% in terms of IRR as well.”

Q And what are the other companies where you have led the investment in, the recent ones?

A Yeah, so I largely, okay, the financial services portfolio within Avistar, uh, and again, as I was saying, our thesis has evolved over the years. Um, and our portfolio is a healthy mix. Uh, we have a small finance bank in our portfolio called Utkarsh. Uh, we have, uh, a large MFI in the Eastern region called Aarohan Microfinance. Uh, we have, uh, uh, uh, A small housing finance company called Altum Credo focusing on the EWS LIG segment. Uh, we have a very interesting payments company which started off as, uh, uh, ATM managed service provider for banks and has now evolved into a full stack, uh, payment service company for large banks. Uh, so our portfolio is quite diverse. There is no concentration on any one particular type of business. And, but all across all our companies, we focus on this segment, which is largely the underserved populations of, you know, women or rural women. Uh, small business owners, uh, financial infrastructure, all of this. So, yes, I, I, I've made about 11 odd investments, uh, from Avishkar, uh, all in financial services.

AI assessment note: “we have a small finance bank in our portfolio called Utkarsh”

Q And among the Avishkar's portfolio, 87 of the, 87% of the companies are in seed and early stage. What about the rest 13%? Tell us about the exceptions.

A So we have evolved our strategy, investment strategy over the years. Initially, our first few years, we were only focusing on very early stage seed investments, because at that point in time, the ecosystem was not fully developed. Uh, yet, uh, in, in, in the space that we were investing in, and hence it required that kind of investment support. Uh, over the years now, that ecosystem is vibrant, thriving. There are a lot more investors who have come in. Uh, in fact, the whole VC ecosystem has become so much larger with all kinds of, uh, investors, uh, on the horizon. And so now slowly we are moving, uh, to, uh, growth And early growth company investments as well. So the 30%, uh, of our investments are mostly in early growth businesses as well to support companies from, uh, series A to series B stage, uh, of their journey.

AI assessment note: “investments are mostly in early growth businesses as well to support companies”

Q venture capital space in India is a male-dominated space if we see gender equations, especially in the partner level of VC firms in India. However, Avishkar has made a difference if we see across the team. There's a good mix of gender diversity. We also see 30% of your portfolio companies have women as founders or board members. Was all of this done with an intention to balance gender equation?

A Uh, I think, I, I don't know about intention, but it, it just so happened that even when we hire, we hire on merit, and it just so happened that the women we hired were extremely competent with very, very strong, uh, you know, uh, experience in this, in this space for us to hire. So it's not like they got, uh, special brownie points just because they were women, we hired them out of merit. Right. And so probably we are one of the few funds who don't apply gender bias when we are hiring. That is one. And the same thing applies when we are evaluating deals. So we evaluate deals only on the merit of the deal and not whether, you know, it is a female entrepreneur or not. And most often enough, you've seen that, uh, teams which have a healthy mix, uh, tend to do better. Uh, and, you know, and now when you read a lot of, uh, global literature, you see that, uh, it is true that well-balanced, well-diverse teams tend to do far better than, uh, very homogenous teams. Uh, so yes, uh, I don't think, uh, we, uh, do that consciously. However, what we do consciously is we try to create, uh, corporate governance. Uh, even at the board levels, we try to ensure there is, uh, gender balance on the, uh, on boards. Uh, we try to bring in senior, uh, women leaders who are able to add a lot of value. Uh, and then, uh, because we also believe that, uh, when Uh, leader, when women leaders are there, t…

AI assessment note: “I don't think, uh, we, uh, do that consciously. However, what we do consciously”

Q And if you can share, you know, what does a typical first check from Avishkar looks like both at early stage and at growth stage? And what kind of ownership is looking in a company?

A So, um, the typical check sizes could be anywhere as low as about a million dollars, uh, depending on, uh, you know, the size of the company and the, uh, stage of the company. Uh, we've also invested in companies which were just a business plan stage where we really liked the entrepreneur. We really believed in his idea and we said, you know, we want to back you. Uh, one such example was, uh, Equitas small finance bank. When they first came to us, uh, they were just, uh, a business plan, uh, but we really, he had a very compelling story and very strong track record of his own. And so when we started off, uh, they just about had the license to begin. And, uh, and as they say, rest is history because it was one of the first companies in our portfolio to go, uh, public and it's now a listed company. So, um, uh, so that we go in that early as well. So about a million dollars is our check size, but now, uh, we can also support our companies longer, uh, till about 15 odd million dollars. So one to fifteen million is the range in which we invested.

AI assessment note: “So one to fifteen million is the range in which we invested.”

Q Avishka is a very different kind of fund. Can you elaborate more on the thesis of the fund, you know, and some of the five top, five to top 10, the top companies of the fund, you know?

A Sure. So, uh, yes, you're right. Avishkar is different. Uh, we started also very different, uh, and, uh, you know, we are very unique, uh, in that respect. So when we started way back in 2001, um, you know, we, we started off with the investment thesis, which, uh, identified rural enterprises as an opportunity. And this is way back then where, you know, VC industry itself was extremely nascent. And even the few who were there were only talking of a handful of tech investments and that too in the large cities, like say a Mumbai, a Bangalore, uh, that, that was where all the capital was concentrating. And so then, you know, to say, okay, we believe there are enterprises, uh, in rural India that have, uh, the ability to scale and have the ability to absorb, uh, capital to grow, uh, was a little unheard of. Um, around the same time, we also identified, uh, microfinance, a sector, a sunrise sector back in 2006. And so with these two, uh, hypothesis, we started our fund investment journey and, uh, and over the decade, as I said, things, uh, we have evolved, uh, during the decade, the term impact investing got coined. And um, and uh, you know, people started globally recognizing us as a pioneer in impact investing. So it was not a term we called ourselves. It was, you know, the global world suddenly woke up and say, you know, what you guys are doing, uh, would classify as impact inves…

AI assessment note: “we started off with the investment thesis, which, uh, identified rural enterprises as an opportunity”

Q And how has the fund, you know, you mentioned about 32 exits in the fund. How, how have you planned your exit? Like, and, uh, if you can share the horizon of exits that have been.

A Sure. So, you know, uh, what's very interesting in Avishkar, our, uh, ideology is, We are not in the business of investments. We are actually in the business of exits, because only if we are able to generate exits and returns for our investors, will we be able to successfully continue raising our funds and then continue investing. So we have a very strong filter for exits, uh, right at the time of evaluating deals. Uh, so, and, uh, you know, uh, there's significant time spent in just addressing the exit thesis. For most of the companies that we get into, uh, we don't have a strategy which says, uh, let's pray to God and let's just go ahead and make this investment because that doesn't cut it for us because we we've known how difficult exits are in, in India and, uh, and the kind of effort that goes into, uh, building exitable companies. So exit is a very important filter for us. At the time of investment itself.

AI assessment note: “we have a very strong filter for exits, uh, right at the time”