It is no secret that venture capital is on the rise. Companies today are raising more money than ever before and are seeing higher valuations than their earlier counterparts.
In 2018, the global VC market witnessed between 30–50 supergiant (USD 100M+) funding rounds per month.
That averages out to more than one USD 100M+ round of investment every single day of 2018. The trend strongly highlights the inclination of investors globally to create larger companies that can tackle problems at unprecedented speed and scale.
This however, does not reveal the full story. Most of the VC funding is concentrated by geography and sector. For example, the Technology sector itself has been accounting for ~50% of the funding raised in the last 5 years.
The bottomline is that there is no dearth of money when it comes to fundraising. But as with most of the capital in the world, venture capital has a distribution problem, not an availability one.
There is a plethora of opportunities in the market that are underserved by VCs, making it harder for entrepreneurs to venture out into those spaces.
The past decade has also witnessed the birth of some key challenges for the future. From food and water shortage to alarming levels of greenhouse emissions around the globe, there are existential issues facing the world that need urgent action but are not getting the level of attention needed to successfully tackle them at a large scale.
Let us explore India as an example. India is one of the world’s fastest growing economies with a current GDP of ~USD 2.7 Trillion. It has a lot of growth potential in the future and its vibrant startup ecosystem is enabling market opportunities for entrepreneurs to build global companies and create value for various stakeholders in the Indian economy.
However, India faces some key challenges in the future such as:
- Agriculture Modernization — Agriculture employs almost half of India’s workforce, but accounts for only ~15% of the its GDP. Average landholdings of Indian farmers are below two hectares. Smallholder farmers face manifold issues in terms of productivity and efficiency.
- Livelihood Generation — Unemployment levels have been steadily rising, and after several years of staying around 2–3%, the headline rate of unemployment reached 6% in 2018. This rate of unemployment is the highest seen in India in at least the last 20 years.
- Alarming Air Pollution — 22 of the world’s 30 worst cities for air pollution are in India.
- Water Scarcity Crisis — Currently 600 million Indians face high to extreme water stress and about 200,000 people die every year due to inadequate access to safe water. By 2030, the country’s water demand is projected to be twice the available supply, implying severe water scarcity for hundreds of millions of people and an eventual loss in the country’s GDP.
These problems, although outlined above with the Indian context in mind, have been witnessed globally as well.
Credit is due to organizations working towards a healthier and sustainable future but most of them rely on external support through grants, donations and goodwill. This makes economic viability a key challenge on the path to effective outcomes.
Venture Capital can play a key role in markets such as Agriculture and Climate Change to build businesses that are both sustainable and profitable.
Moving forward, we must reevaluate the importance of sectors being funded, the problems being solved and the role of the investor ecosystem. The current blitzscaling model of “build today, deploy tomorrow and monetize later” is not a mould that fits every kind of business. There is a need for patient capital to back businesses in an active fashion alongside the entrepreneurs.
Blue Ashva Capital is an investment Fund that is backing sustainable and long-term profitable businesses which are solving real challenges and building lasting value in core sectors including:
- Agriculture — Invest in innovative, sustainable and inclusive agriculture practices
- Agroforestry — Invest in innovative business models to build a green environment
- Climate Change — Invest in a low carbon future
- Micro Enterprises — Invest in creation of livelihood opportunities for the masses
The fund seeks to generate blended value of competitive financial returns and measurable development impact.
We believe that the real problems that our world is facing today in terms of climate change, agriculture productivity and livelihood generation can be effectively addressed only by businesses operating at the intersection of profits and purpose.
If we channel resources and energy to the right industries, business can be a force for creating positive social change and not just a medium for wealth creation.
Interested in learning more? Find us at www.blueashvacapital.com