Social Entrepreneur in India: “To be or not to be” (Part 2)
In Part 1 (Click here), we discussed the need of social entrepreneurship across various sectors in India — Education, Healthcare, Livelihood, Agriculture, Financial Inclusion, Clean Energy. We also discussed the government’s efforts in each of these sectors and the impact it has had. In this part, we shall cover the investment and other fundraising opportunities for sociopreneurs; the efficacy of Indian laws and government schemes — do they encourage or discourage social entrepreneurship?; the attitude of people (towards social change) who you will need to join your team as you scale up your idea; and finally some enterprises you can learn from; all this to help you make a sound conclusion on whether ‘to be or not to be’ a social entrepreneur in India.
Understanding Fundraising for Social Enterprises
Fundraising as a topic has been widely discussed. However, for social enterprises in particular, it is slightly different. In fact, the field is wider than other enterprises. There are benefits social enterprises enjoy as they have multiple modes of fundraising available to them but it is also true that raising those funds — irrespective of whatever mode you chose — can be much tougher compared to another non-social enterprise. Let us look at the ways available to a social enterprise:
- Incubator / Accelerator
If you are a for-profit social business, then you are eligible for any of the incubation facilities available across the country — as long as your business model meets the basic parameters of the incubator (technology or particular sector focussed for example). Most incubators fund enterprises for as less as 20 Lacs in addition to giving support in terms of dedicated office space, networking, mentorship, technical training, etc. For a list of incubators primarily focussed on social enterprises in India, click here.
An increasing CSR spend by corporates has brought smiles to various social entrepreneurs as they can now look beyond their struggle for funds to scale up. As per the Schedule VII of the Companies Act (2013), corporates must spend 2% of their net profits average over last three years towards social upliftment. Most of them allocate their funds towards an enterprise already creating impact rather than starting their own ventures. Unfortunately, this window is open only for non-profit social enterprises. However, for-profits can still look to raise funds from corporates if they are working under a government approved technology incubator.
- Impact Investment
This is the space which every for-profit social enterprise eyes. It is an equity based investment solely focussed on enterprises creating impact in the society and is a function of the same impact. For an impact investor or impact investment fund, an enterprise’s profitability is the secondary measure and impact the primary. According to the Global Impact Investing Network, impact investment in India accounts for more than 12% of the global total. And as per a McKinsey report, the average deal size has more than doubled (from USD7.6 million in 2010 to USD17.6 million in 2016)
Vivek Pandit, a Senior Partner and global co-leader of McKinsey’s private equity practice, says: “Investors around the world are seeking opportunities in socially responsible and purpose-driven projects. India is an attractive market with a large population and several social measures under stress, a government motivated to bridge social gaps and supportive of policy changes, and underlying economic growth and stable financial markets.
However, let the figures not excite you. Maneet believes that its not as easy for an enterprise to raise impact investment, especially when when compared with the U.S. Recently in Silicon Valley, he observed that for investors during the process of due diligence, measuring the enterprise’s impact was their prime motive. Whereas in India, he was always asked to prove the firm’s profitability first whenever he pitched for raising funds.
A few impact investment funds in India are: Acumen; Omidyar Network; Yunus Social Business; Village Capital; Ankur Capital; Aspada; Elevar Equity; Caspian; Lok Capital; Asha Impact; Sangam Ventures; Beyond Capital; Menterra; FISE (Tata Trusts); Aavishkar; Grey Matters Capital; Unitus; Responsability; Accion; Khosla Ventures; Grassroots Business Fund; LGTVP; Villgro
Crowdfunding is the way to go for small investment sums without any compromises in any equity. Platforms like Ketto allow you to raise funds from public against a very small fee. What matters in this form of fundraising is your credibility and a revolutionary and promising idea in which people are ready to have faith. And the trend and awareness of crowdfunding is rising. Bodhi Tree Skills is an example of an enterprise which sustained on crowdfunding for a long time. “We can see a huge difference in the mindset of people — if we compare the involvement of people, the number of donors, the amount raised, the number of campaigns in the last 3 years,” shares Varun Sheth, Co-founder, Ketto.
Other promising crowdfunding platforms in India are Milaap, Impact Guru, WishBerry, Fuel A Dream.
- Government Grants
Government has a lot of grants, especially for non-profits. But most of the social entrepreneurs believe that they are not easily accessible owing to the current situation of our governance. As Ramkumar smartly puts it, “You need a strong concept to begin with — you need to be clear about the USPs. Then you need confidence in the product/service. Then comes the most important part — a mentor who can guide you with the right approach and network to access the grant.” He also suggests that one should not get frustrated in the process. Others also share the same thought. It’s all about knowing the right entry route. Sanjay Banka also suggests “looking at international grants as they are comparatively easier to access and large in number.”
- Social Enterprise Challenges and Fellowship Grants
Though competitions are not a mode of funding that one should rely on, it still can be a ray of hope for many. There are various national as well as international challenges dedicated to startups and social startups in particular which can get you a good level of funding or even incubation support. You can find a non exhaustive list of such opportunities in India here. Apart from this, there are fellowship opportunities across the globe, a very smartly curated list of which can be found here.
Understanding Govt. Support and Indian Laws
As a common consensus amongst the social entrepreneurs, “Government is generally immune when it comes to supporting for-profit enterprises — even those that are social,” shares Sanjay Banka. “You are treated as a profit making company and hence get no support from the government. As a result, we end up paying 18% GST on our bio toilets.” The recent GST regime seems to be a topic of discontent for most other social entrepreneurs as well. Prasad Bhide, founder, Aaji Care, also shares similar discontent for having to pay 18% GST on non-medical services given to senior citizens.
Raman Saluja, Founder, Gramco shares his disappointment with regards to the way things are in general, “Indian Laws are the wild card. They are largely red tape rules. In agriculture, inspector raaj is worst than it was a decade back.. To get government support, you either need connections or a lot of luck.”
However, there are also those who believe getting government support is certainly possible. Kevin Houston, Founder, Carbon Masters shares that “the government in most states and at the centre is recognising that to create the jobs that India needs ( 12 million a year for the next 20 years), it has to encourage entrepreneurship in general and for-profit social impact entrepreneurship in particular. There is also a recognition that many of the areas that social impact entrepreneurs are now working are in those areas that are regulated by the state so there needs to be a way of working with government so that the entrepeneur can do what they do best — innovate and grow a business.”
Kevin, due to the latent promise in his enterprise, was also able to influence government to change its policies and offer other support in the past. “Our company was able to get The Karnataka State Government to remove bottled biogas from the VAT regime by presenting a solid case of why this made sense . We have been able to get Government support for our biogas plant in Malur via subsidies from MNRE.”
Maneet also believes the same. He was able to get support from the Govt. of Assam and Govt. of Uttar Pradesh to reach remote areas in search of rural artisans and also in logistics and accommodation whenever his team travelled in the state’s remote areas. One of the state governments has also put in funds in Lal10 with an aim to improve livelihood of the rural populace. However, he is also disappointed with the fact that all artisans across the country have to now pay GST of 5–12% and suffer as a result. “It is not ideal for those who hardly get to make ends meet because the demand for their products from B2C exhibitions have gone down as a result.”
- Government Schemes
Government also has certain schemes to support its development agenda which entrepreneurs can utilise to further their mission, depending on their line of impact:
- Support to Training and Employment Programme for Women (STEP): To train women with no access to formal skill training facilities, especially in rural India.
- Jan Dhan- Aadhaar- Mobile (JAM): a technological intervention that enables direct transfer of subsidies to intended beneficiaries and, therefore, eliminates all intermediaries and leakages in the system
- Stand-Up India: to leverage institutional credit to enable economic participation of, and share the benefits of India’s growth, among women entrepreneurs, Scheduled Castes and Scheduled Tribes.
- Trade related Entrepreneurship Assistance and Development (TREAD): To address the critical issues of access to credit among India’s underprivileged women, the TREAD programme enables credit availability to interested women through non-governmental organizations (NGOs).
- Pradhan Mantri Kaushal Vikas Yojana (PMKVY): a Skill Certification initiative that aims to train youth in industry-relevant skills to enhance opportunities for livelihood creation and employability.
- Science for Equity Empowerment and Development (SEED): to provide opportunities to motivated scientists and field level workers to undertake action-oriented, location specific projects for socio-economic gain, particularly in rural areas.
Understanding People Mindset Needed to Scale-Up
Social enterprises are companies which provide an employee financial support along with a sense of satisfaction — of contributing to the society. However, that might not be the case in the long term, especially in the case of junior level employees. “Maybe in case of leadership, it might be the passion that leads them. But for junior level employees, it’s money what matters at the end of the day,” feels Sanjay Banka.
Raman Saluja shares similar thoughts, “I believe a good honest worker will do sincere work with a good heart whether categorised as social or otherwise. Though yes, social impact space has been well identified and well covered, which also creates awareness and motivates a lot of youth. If working conditions are good — within the organisation and policy environment, good talent wants to join”
However Kevin is optimistic in the attraction a social enterprise has for youth and says, “I believe and have some evidence to support the notion that there are an increasing number of young Indians from both urban and rural areas who want to have a job with a purpose in a company that has a purpose other than just making money.”
It can be safely concluded that social enterprises do have attractions but there’s no such advantage any kind of enterprise enjoys. It’s about finding the right person for the right role with the right priorities in life — the way it is generally.
Understanding and Learning from Social Enterprises
Recent times have seen a large number of social enterprise success stories which has led to the momentum which holds a promise to bring a social revolution in India in most sectors. Some of the enterprises that have created significant impact and an aspiring social entrepreneur can learn from are (apart from the ones discussed above):
- Bodhi Tree Skills (Empowering rural graduates with professional skills)
- Guvi (Provides coding learning in vernacular languages)
- FabIndia (Impacting artisan community by providing them livelihood)
- Inficold (Helping farmers through their thermal energy storage products and services for refrigeration)
- NavAlt (Manufactures solar powered solar boats)
- Selco Foundation (Building an ecosystem for sustainable energy innovations)
- Deshpande Foundation (Helping social enterprises scale up)
- Haqdarshak (Helping underprivileged with awareness of and access to government schemes)
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