India Webinar Nove 2014 Ppt

8/10/2019 India Webinar Nove 2014 Ppt

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avpn.asia

AVPN Webinar6 Nov 2014

Social Investing in

India: Landscape study& Investor perspective

Devangshu Dutta

Ennovent Audrey Selian

Artha Initiative


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@devangshu

PVCpartners

Quick IntroductionEnnovent

Accelerate InnovationsFrom Idea to Impact

Key Services

Market Insights Startup Support Investment Advisory Market ExpansionInnovation Scouting Co-operation Models Investor Access Portfolio Management

Discover Challenges Pilot Management Fund Management Innovation Diffusion

Selection Management

Discover Startup Finance ScaleSource the best innovations Launch innovations in markets Secure funding in enterprises Grow operations and impact
http://twitter.com/devangshuhttp://twitter.com/devangshu


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@devangshu

PVCpartners

Where are Gaps in Government?

Healthcare

Power

Clean Water

Transportationinfrastructure

Education

Environment

Competition

Accountability

Source: The Business of Government, Dutta 2014


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@devangshu

PVCpartners

You need to get your facts

first, and then you can distort

them as you please.

~ Mark Twain


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@devangshu

PVCpartners

0 1 0 1 0 15 7

20 20

27

139

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3 1 2 2 36 8

15

2622

26

5255

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

MFI Other Sectors

Impact Investments in India

Acceleration of investments

Non-MFI areas gaining traction

Geographical diversification

Urban markets

Source: World Bank, Intellecap


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@devangshu

PVCpartners

Challenges through the Life Cycle

Discover

Selection

VettingStructure

Monitor

Exit?

India challenges

Sector challenges


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@devangshu

PVCpartners

The Context

Metric (rounded off) Impact Investment E-commerce

Estimated Organizations 200 (non-FI) 100+

Immediate Target Market 800+ mn 7-10 mn

Invested/Committed US$ 400 mn (non-FI) US$ 5 bn

Investment per Target Individual US$ 0.50 US$ 500

Investment per Organization US$ 2 mn US$ 50 mn

Sources: Various, PVC Partners analysis


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@devangshu

PVCpartners

The Context

Metric (rounded off) Impact Investment E-commerce

Estimated Organizations 200 (non-FI) 100+

Immediate Target Market 800+ mn 7-10 mn

Invested/Committed US$ 400 mn (non-FI) US$ 5 bn

Investment per Target Individual US$ 0.50 US$ 500

Investment per Organization US$ 2 mn US$ 50 mn

Sources: Various, PVC Partners analysis


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@devangshu

PVCpartners

Capacity Enablement

Entrepreneurial

Number of companies being funded

Impactful Aggregation

Investor

Infrastructure, People

Metrics & tools

Collaboration


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@devangshu

PVCpartners

Policy and Legal Frameworks

Recommend using more equity-like instruments

Compliances more rigorous, onerousnew

Companies Act 2013

Policy fluid (e.g. Act clauses are still being discussed

and debated)update yourself for each transaction

Have a good combination of Company Secretary,Chartered Accountant and Lawyer


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@devangshu

PVCpartners

I believe a nation is only as safe, just,

healthy, rich, successful as the

experience of its least privileged citizen.

What can we do to raise the floor?


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@devangshu

PVCpartners

A POSSIBLE METRIC:

Can we look at reducing

the target market by halfevery 5 years?


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@devangshu

PVCpartners

THANK YOU!

Additional thoughts:

http://is.gd/hKIPmX

[email protected]
http://twitter.com/devangshuhttp://is.gd/hKIPmXhttp://www.slideshare.net/DevangshuDutta/india-the-business-of-governmenthttp://is.gd/hKIPmXhttp://twitter.com/devangshu


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The Artha Initiative

AVPN webinar:Social Investing in India

Landscape study & investor perspective

November 6th, 2014

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Who we are: Ecosystem building in India

Artha Venture Challenge

A nationwide challenge to identify the most valuable investment opportunities Match funding (30 lakh, equity) basis for venture challenge

Partnered with Ennovent and Villgro for call out and capacity support

200+ enterprises identified; 26 finalists selected, 7 investments to date, 11more currently worked on over the last 2 years

Artha Platform India

Online platform for better information exchange and collaboration betweeninvestors, entrepreneurs, enterprise support organisations & local third serviceproviders

Simplification and facilitation of the due diligence process, including tender tolocal third parties

Visibility on day to day investor activity is likely to catalyze better coordinationand collective action

Artha Networks Inc. Arthasbespoke architecture now available for licensing and white label

deployment in other geographies

First deployment in Latin America under auspices of the Inter-AmericanInvestment Corporation/IADB in 4 countries.

Called InvestAmericas.com


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What to consider when yourea helicopter investor

Admitting that you are a helicopter investor

Really absorbing this fact: bridging the distance requires effort

Building relationships that lead to collaboration take time and resource

Transaction costs for due diligence: the smaller the deal, the higher the relative costs

Regulatory issues for foreign investors are serious; good lawyers are vital.

Structuring deals takes a long time, and negotiating terms does not always happen in a

fluid manner

Every co-investor has their own method and standard; can we build bridges on these?

Flexibility is hard to demonstrate when you are acting on the remit of a larger foundation,

family office or fund

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Challenges to Impact Investing

Cutting through the noise: One of the greatest challenges to impact investing is the ability to

sort through many opportunities to find the most suitable and attractive ones. How can this bedone effectively, without forgetting that we are serving entrepreneurs with hard core social

missions?

Counteracting concentration and herd mentality: According to Intellecap, well over 80% of of

impact deals in India last year were concentrated into only 15 enterprises. We must find ways to

be more committed to taking the risks that our flavour of capital should enable, and to diversifying

our activity as a collective.

Moving the needle: Collaboration for deep dives into a particular sector in a particular part of

the country is not happening. Investing in three energy businesses in different parts of a vast

country does not necessarily move the needle when it comes to energy access for the BoP. Can

we think about bundled, coordinated approaches?

Trust and relationship building: Using existing networks to identify good collaborators onvarious transactions, and to find and build relationships with vital local service providers (like

lawyers) is a good idea. What/Who are the key touchpoints and nodes that a newcomer should

get to know?

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Over the years, we have come to a number of conclusions about our preferred approach to

the terms of our investments:

We tend to opt for using compulsorily convertible cumulative preference shares (CCCPs) or

compulsorily convertible cumulative debentures (CCCDs); the coupons associated with these

need to be appropriately positioned. We do this because many companies we look at are a bit too

early stage to want to accept straight equity and have the full-on valuation conversation.

Convertible instruments appear to be preferable.

We look at deferring dividends or coupon payments until companies are in a good cash position tosupport them.

We look at 7-10 year investment times frames on exits.

We tranche our investments and tie injections of capital to milestones based on operational plan.

We are open to co-investment and have frequently left rounds based on terms we have

negotiated open to others for limited period of time.

We are happy to ratchet (baseline floor) valuations on company performance, though typically at a

minimum on EBITDA and rarely just on a set of turnover targets. This allows the company to get

a better valuation at the point of conversion if it achieves its performance targets.

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Our thinking on most of our impact investments


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For AVC Co-investorsa sample of our thinking

We do our best to match the lead investment invest with our equity portion on a pro-rata

basis, with a few important caveats and pre-conditions:

Permitted transfers

Board seats: We typically prefer to have observer rights for

AVC deals, allowing the leadinvestor to represent the interest

of our investor cohort; in certain instances, we will be happy to

step forward for a Board seat, but prefer not to do so on all

transactions

Pre-emption of share issues: All future share issues by the

enterprise in subsequent dealings afford us a pro-rata right offirst refusal. This amounts to our right, but not an obligation,

to buy new shares on terms no less advantageous than those

offered to other investors before they are offered elsewhere.

Pre-emption on share transfers: We consider it a right that

existing shareholders be given a right of first refusal to be

purchase shares from any shareholder who wishes to sell his

shares to a 3rdparty.

Tag along Rights: Standard pro-rata tag along rights to beafforded to minority shareholders including ourselves on all

AVC transactions, such that if/when the promoter and / or the

majority shareholder sells his stake, we may retain the right to

join the deal with the same terms and conditions.

Reporting: We are keen to ensure that reporting as an

obligation of the AVC investees is not overly burdensome and

believe that quarterly updates are sufficient.

Drag along Rights: This is a potentially sensitive point in such

transactions; our preference is that this right enabling a majority

shareholder / shareholders (with a suitably sized majority

shareholding) to push minority shareholders to join in the sale of a

company (on the same price, terms and conditions) is important for

exits to be achieved - especially in businesses where there are

multiple shareholders.

Economic Pari Passu terms: We strongly believe in equal

economic treatment for all investors in a common round, i.e.,paripassutreatment insofar as all economics are concerned between

investors and the company is the most optimal way to align

energies and incentives over the long term in the AVC context.

Legal Documentation: Artha requires all legal documentation to be

drafted, in agreed form and executed at the time of the investment

being made. For the avoidance of doubt this includes SHA,

amendedAoAs, etc.

Compliance, governance, transparency and simplicity: TheAVC is conditional on the terms of the investment and the operation

of the investee companies be in compliance with all necessary and

applicable laws and regulations. The legal documentation will also

need to be drafted so that all parties agree to adopt good

governance processes and procedures with regard to the

investments and the portfolio companies. We will also seek to

ensure that all parties seek to operate with maximum transparency

and seek to ensure that whilst robust, legal documentation is kept

as short and as simple as possible.

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How do we get transactions moving faster?

How do we offer and accept constructive criticism when our processes and practices are

less than optimal?

Can we enable more peer to peer investor feedback through the AVPN?

What do we consider our best investment successes, and why? Ditto for failures.

How do we boycott legal agreements that are longer than 40 pages?

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The Hard questions/ Hard Talk


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Thank you

Questions?

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Engage with us [email protected]
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India Webinar Nove 2014 Ppt