Viewpoint: Impact Start-Ups Left Out of India’s Funding Boom

Monday, February 22, 2016

Aasaanjobs’ fund-raising journey has been a bit different so far from most impact start-ups. Last January, the Mumbai-based company picked up $1.5 million in seed capital from Inventus Capital Partners and IDG Ventures India. Both are mainstream venture capital firms and generally don’t back businesses that focus on consumers at the bottom half of the pyramid. This week, the two firms increased their investment when the company raised $5 million in a Series A round led by Aspada Advisors, the venture capital firm backed by Soros Economic Development Fund.

Inventus and IDG Ventures don’t classify Aasaanjobs, which runs an online jobs portal for blue- and grey-collared professionals, as an impact investment. In the long term, that could be a good thing for the company. The quantum of capital deployed in impact start-ups remains disproportionately low within the overall start-up universe. Over the past seven years, more than 300 impact start-ups in the country have raised about $1.6 billion.

On the other hand, non-impact start-ups garnered venture capital worth $1.8 billion in 2015 alone, according to data compiled by Chennai-based research firm Venture Intelligence.

Impact start-ups find themselves on the sidelines of the funding boom that has been underway in India over the past few years for a couple of reasons. One, the impact tag itself hasn’t been particularly helpful for such companies because of the perception that ‘impact’ doesn’t necessarily imply profit and scale-oriented businesses. As a result, mainstream venture capital firms haven’t been enthusiastic about bringing in capital, whether at the seed stages or follow-on capital at the Series A and B stages. Last year, for instance, out of the 90 early stage impact investment deals reported, only 12 involved mainstream venture capital firms.

Source: Livemint (link opens in a new window)

Impact Assessment, Investing
impact investing