Rural customers were the main targets in two-thirds of social venture funds and impact investments in the country in the last 13 years, revealed the fifth Annual Report on Indian Venture Capital and Private Equity that was released by IIT, Madras recently.
The latest report concentrates on social entrepreneurship and the impact of investments. It is based on the analysis of 523 deals in 212 companies, involving 114 investors, covering a period of 13 years.
The report points out that the business that targeted rural customers constituted two-thirds of the total investment. The business also accounts for 65 per cent of the total deals.
Meanwhile, the share of businesses that sourced supplies from rural producers ‘has been small so far’, notes the report. The study also pointed out that social investors have invested in more number of companies as compared to main stream investors. But in terms of the amount invested, foreign investors and mainstream investors have made more investment.
“On an average, domestic as well as social investors invest in more number of companies, whereas foreign and mainstream investors make higher investment per deal,” said the report. “The emergence of social venture funds in the last few years has been beneficial in making early stage funding available to social entrepreneurs. These social funds have been able to make smaller investments that normally do not get the attention of the larger mainstream venture funds. But these funds have shown more patience by staying invested in their portfolio companies for a longer duration and supporting the entrepreneur when the business is most vulnerable,” said Thillai Rajan, associate professor, Department of Management Studies and the Editor of the publication.
The study pointed out that social investors are prepared to stay invested in a company for a longer duration as compared to other fund types. The average investment duration of a social fund is 57 months, whereas it is 46 months for a mainstream fund. On the whole, the average duration of investment in social enterprises is 50 months, which is substantially higher than the average investment duration of 17 months for overall VCPE investments in India.