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When Intellecap was founded in 2002, few people would have predicted that it would become a social business and investing powerhouse, with over 600 employees and 300 engagements across 25 countries around the world.
The company has since become famous for taking an ambitious “whole ecosystem” approach to enabling social change, providing impact investing, consulting and research services to its clients, catalyzing regional markets through the Sankalp Forum and its angel investor network, and even founding three impact-focused companies.
But according to co-founder and director Vineet Rai, Intellecap’s early years were defined by failure – and the experience taught him a valuable lesson. “I took six years to raise a million dollars, made six investments in those first six years, and almost all of the investments were struggling,” he says. “So my first big lesson was: If you are a good person trying to work with (other good people) to make a difference in the lives of the poor, the consequences may be disastrous. So you have to keep your goodness, but you need to bring in discipline. You have to move away from just talking about good things, and to a disciplined action – which is very, very different from just being bleeding hearts.”
Years later, Intellecap’s hard-won success would teach Rai an equally important lesson: “If you are naïve, and you do not know what you are doing, chances are, you can make a difference. Because many of us who have actually seen a lot of things fail, start becoming very conservative in taking risks. I think new ideas require people to be very naïve, and very inexperienced about how the world functions. So I’m actually encouraged when I find people who talk about very stupid things which we know will fail, because these are the kinds of people who will probably come up with a new idea that will work.”
That description could have described a young Rai himself, as he worked to launch Intellecap almost 15 years ago. “The honest truth is I was too naïve to really be able to articulate a vision that this would happen,” he says. “So almost everything that has happened with Intellecap, Aavishkaar and everything that we have built has actually been a chain of reactions. … What was very clear in our minds was that entrepreneurs need to succeed, and we didn’t want to wait for somebody else to come in and try to make a difference, so rather than waiting for somebody else to do something that was missing in the value chain, we decided to do it ourselves.”
According to Rai, Intellecap’s ecosystem approach is reasonably well-developed in India, and the company is now expanding into neighboring countries in South and Southeast Asia, with Aavishkaar recently closing a $45 million new fund investing in those geographies. They’re also planning to replicate their approach in East Africa. They chose that region, he says, in part because it has a fairly vibrant developmental economy and impact investing scene. He believes it just needs support in bringing these different pieces together – a job that’s right up Intellecap’s alley. But rather than taking a couple of decades, as it did in India, they’re planning to do it in five to seven years. “Intellecap has already set up an office there,” he says. “We have done Sankalp. We have set up our impact angel network, and our consulting team is already on the ground. And we are hoping to take … the rest of our ecosystem elements there over a period of time.”
In this wide-ranging interview, Rai discusses how Intellecap balances the need for financial returns against its desire to cause a social impact, and he delivers some hard truths: “On a risk-adjusted basis, impact investing will always deliver lesser returns.” He also reveals the two types of investable businesses that reliably make a difference for very poor people, offers his response to recent research questioning microfinance’s social impact, and discusses the upcoming initiatives at Intellecap that excite him the most (hint: virtual services are involved). You can view the interview in the video below.
James Militzer is the editor of NextBillion Financial Innovation.