Can Start-ups Drive Social Impact?
Can start-ups drive social impact? I recall constantly wondering about this, before taking a leap of faith and shifting to Mumbai to join Drip Capital. Prior to taking up this role at Drip, I worked with some very dedicated development professionals in Delhi. Working for the Government of India, at the heart of policy making, profitability (both personal or at an enterprise level) seemed like a secondary metric to my colleagues there, especially compared to social impact.
When I was about to take up the Research Associate (RA) role at Drip Capital, one of my ex-colleagues asked me, “Can a start-up even solve problems for a complicated and largely ignored sector like small and medium enterprises (SMEs)? Do they have the resources to do this? More importantly, would they have the intent?”
These questions made me ponder my role at Drip Capital. What expectations rode on me as an RA, and how was my previous experience in policy and analytics going to help a start-up in a full-throttle growth phase? Why was Drip Capital publishing research reports on exports and SMEs instead of just focusing on the basic business parameters that other start-ups focus on — improving turnaround times, developing customer-centric products, deepening market penetration, etc?
My questions were soon answered after when I met Pushkar Mukewar, Co-Founder and Co-CEO of Drip Capital. Pushkar recounted his experiences from 2016, when he had just moved to India and was trying to establish the business in the country. The company’s target segment, SME exporters, while being large in number, were scattered across the country, especially in tier-III and IV towns.
These businesses carried immense potential but lacked requisite finances. Additionally, they were heavily dependent on subsidies and suffered from big information asymmetry. Pushkar realized that spreading awareness and education could go a long way in helping these SME exporters grow their businesses and make them self-sufficient. This was a key insight that drove his vision to take Drip beyond just satisfying the SMEs’ financial needs. An intervention that could have a direct impact on the country’s growth and GDP — the idea was enough to excite me.
At Drip Capital, I may not be a tech or product wiz who lays down the foundations of the firm, or one of the sales/marketing honchos who are the face of the company, or a risk custodian, who forms the first line of defense for the organization. Having said that, my role would be crucial to help plug this information asymmetry among SME exporters — clients or otherwise.
Just financing the exporters would be akin to simply giving a man a fish, when what he really needs to learn is how to fish for himself, for self-sustenance. The research and education I would drive would help businesses stay abreast of relevant economic developments domestically and around the globe, allowing them to make informed decisions and provisions accordingly.
One of the first analyses I took up along with Raghav Khajuria, my line manager, was for our Series-B funding announcement. We were trying to look at some broad macroeconomic data pertaining to Indian exports and SMEs’ contribution to it.
The officially quoted figures everywhere pegged the contribution of MSMEs to Indian merchandise exports at 40%. But shuffling through some PIB press releases and DGFT data, we were surprised to find that the contribution had gone up in recent years to be closer to 50%. Crunching more numbers, we discovered that while Indian exports grew at a CAGR of around 9.5% between FY17–19 and MSME exports themselves grew at around 7.5% overall, the SME exporters that Drip Capital financed were able to grow at a whopping rate of nearly 20% during the same period.
While we could not establish direct causation and ignore the inherent biases in the research completely, we were certainly able to draw inferences about the extent of these exporters’ unmet need for capital — a need that was likely restricting India’s economic growth.
The thought of the potential impact we were having on the growth of these exporters, their employees and the overall economy was overwhelming. Additionally, if our research reports on commodities and trade could help these SME exporters plan for the future, find new markets and embrace global developments to grow their business further, we could create a huge difference for these businesses.
Based on the feedback that we received for our last report on plastics, we sensed that our research has been well-received across key stakeholders. I enjoyed doing a comprehensive deep-dive into the sector we picked, from both quantitative and qualitative aspects, and explaining the state of affairs to the readers. It was good to hear that the insights of the reports were picked up by various agencies and SME exporters too. I hope that our research and recommendations will help create the intended impact for SME exporters in the country in the longer run. Six months into my journey here, I already feel that start-ups can definitely drive social impact Drip Capital is trying to champions that very cause.
