'Impact Investment Returns Are Similar to VC, So Why Not Give Back To Society'
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At a time when the Indian start-up ecosystem is growing, it is important for investors to support and fund companies to scale up. According to a report by Economic Diplomacy and States Division, under ministry of external affairs, India is currently the world’s sixth-largest economy at $2.6 trillion. With the government aiming to become a $5-trillion economy by 2025, the robust start-up ecosystem may have a huge role in helping India reach its goal.
Investment becomes an essential part to help start-ups grow; meanwhile it is only natural for investors to expect financial returns from their portfolio companies. While speaking with Entrepreneur India, impact fund Unitus Ventures’ and financial services company Unitus Capital's CFO, Vikas Sarda, said returns from impact investments are nearly in the same trajectory as commercial investment or venture capital (VC) investment. “So why should Unitus not choose to do impact investment and return back to society without compromising on the financial returns?”
Unitus Ventures’ Take on Investment
Founded in 2012, Unitus Ventures invests in early-stage tech start-ups. It focuses on fintech followed by healthcare, jobtech, education and artificial intelligence. It counts 25 start-ups including Cuemath (exited), Curiositi, Kyepot, New Street Tech, Cyclops, Betterplace in its portfolio. It has already made four exits. Unitus Ventures generally makes investments of between INR 3 crore and INR 5 crore.
Unitus Ventures has two funds. The first fund, which was around $25 million, has been deployed. The second fund which will close in December or early next year and is expected to reach $50 million.
“My vision is that if I can marry financial returns along with the impact, the social good, then there can be nothing like it. The whole world is also going to see that investments in impact space are increasing exponentially year on year and people are realizing that the returns on impact investment is in line with commercial investments,” said Sarda.
When asked about future plans, Sarda said that he personally would like to foray into renewable energy sector, but it may be difficult as it is very capital intensive business.
Talking of interactions with various founders, Sarda said one can become very lonely while promoting any business because they encounter tough times. “The passion to keep going is what you learn from founders of the businesses which are successful today because they were at stress when they started. It's lonely there but please hold on to it if you are passionate about it,” said Sarda.
How Does Unitus Decide About Its Investments?
According to Sarda, business idea is one of the most important factors for Unitus Ventures to invest in any start-up. “There is no point in starting a business which is similar to an existing business,” he explained. Secondly, the people, their background and passion behind the idea is very important. “We look into whether the promoter wants to do the business as seriously as he wants to breathe. We try to know if he is flirting with the idea. If he is, then it is a no-go because then the vision won't be there after a few months,” he added.
“We are here not just to infuse money or to give capital to start-ups. We believe in the sixth element of start-ups. When we come to a start-up as an investor, we bring in other expertise also, like something then in their business plan, their business strategies, we take quarterly updates from our investee companies and guide them,” said Sarda. Unitus Ventures also looks to aid start-ups in securing next round of funding. “We also have an advantage of scale and several vendors work with us. Start-ups may not be able to hire good consultancy firms and provide it to them at a very good pricing as it is a bulk investment for vendors,” Sarda added.