NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, February 23, 2016

With nearly a decade and a half of working in the social enterprises space, Paul Basil firmly believes that there is a huge gap in funding for-profit ventures that cater to the bottom of the pyramid. There are funds available at the angel space and then at the Series A stage, when the ventures get their first round of funding from VC firms. But, between the angel and the Series A stage, there is a huge gap.

After the angel round, says Basil, Founder and CEO, Villgro, an incubator for social enterprises, the ventures need more capital. With the network of angel investors growing, the ticket size has gone up – to about ₹50-60 lakh. The Series A round typically sees investors putting in about ₹5 crore in a venture. But, the ventures need to demonstrate certain level of unit economics for a Series A investor to feel comfortable putting in the money.

The business model, especially in the case of a social enterprise, may also call for a lot of iterations and hence a slightly larger round of seed funding is required.

It is this gap that the recently-launched Menterra Social Impact Fund 1 hopes to plug. Basil, who is Advisor to Menterra Venture Advisors, which manages the social impact fund, says it is not a capital problem alone for the ventures. Till they are ready for a Series A round, they need advisory support and mentoring. “This is where we see Menterra and Villgro co-existing,” he adds.