Access to funding, lack of information and failure by entrepreneurs to provide business history, have been cited as some of the challenges facing startups in Africa. FILE PHOTO | NATION MEDIA GROUP

Access to funding, lack of information and failure by entrepreneurs to provide business history, have been cited as some of the challenges facing startups in Africa.

Investors, funding organisations, entrepreneurs and other interested parties from the continent, yesterday converged at Strathmore business School for a two-day forum seeking to bridge the gap between businesses and access to funding.

Speaking at the event, country manager of an investment organisation Business Partners Sally Gitonga, noted that it is important for businesses to have a clear focus when presenting business ideas to funders.

Venture capital debt providers lend to start-ups and small and medium enterprises (SMEs) in the range of Rs.5-25 crore per transaction at an interest rate of 15-17%. Photo: Mint

Mumbai: Indian start-ups, which typically raise equity from venture capital funds, are increasingly attracting non-banking financial companies (NBFCs), angel investors and even companies that provide working capital loans.

Take the case of Silicon Valley Bank India Finance Pvt. Ltd (SVB India Finance), a NBFC, which has lent money to 75 Indian start-ups since its inception in 2009. Its clients include e-commerce platform Snapdeal.com, owned by Jasper Infotech Pvt. Ltd, Loylty Rewardz Management Pvt. Ltd and Freecharge.com.

SVB India Finance, which has a loan book of around $100 million, was acquired last week by the Singapore government’s investment arm Temasek Holdings Pvt. Ltd that focuses on lending to start-ups.

SVB India Finance is “seeing the best pipeline to date as we have already funded three companies in January and are talking to 14-15 companies for investments,” said Vinod Murali, its managing director.

There are interesting developments underway in Africa. The vast continent repeatedly made news in 2014 for being home to seven of the world’s fastest growing economies, and drew interest for having a large part of its growth driven by the Small & Medium Enterprise (SME) sector. This latter tidbit is crucial. It signals a move away from ‘natural resources-led’ growth in GDP to something more sustainable, and in a manner that can help reap demographic dividend of a continent where 60% of the population is less than 25 years of age.

A significant number of these SMEs are social innovators, taking head-on critical, persistent challenges faced by income-poor populations in the region. They are creating indigenous products / services, building local supply chains, hiring local people and tapping into local markets at the base of the economic pyramid. A bulk of these social innovators also imbibes a crucial tenet of modern leadership – a business philosophy of sustainability.

For example, among the bright young SMEs we have met in the past year is Sun Culture, an enterprise that sells solar-powered irrigation systems. It defines performance in more-than-revenue terms, to the tune of “USD 400,000 in economic impact, delivered in terms of labor savings, input savings and enhanced crop yields.” Sun Culture makes irrigation systems but thinks of itself as a vehicle for improving farmer income and agriculture output. Africa has emerged as a hotbed of exciting social innovations, which in turn, are playing a crucial role in enabling inclusive growth opportunities and development.

“We are in a Catch-22 situation,” says Revathi Roy, a shareholder in Viira Cabs, a taxi service in Mumbai that employs only women drivers. “We can’t scale up because we don’t attract investors, and investors are not interested in us because we don’t have scale.”

‘Women’s taxi companies’ such as Viira and Priyadarshini Taxi Service in Mumbai, Sakha Consulting Wings in Delhi and related initiatives in other cities have basked in the glow of good publicity. While one has seen actor Aamir Khan become its pro bono brand ambassador, others have ‘walked the talk’ with journalist Shekhar Gupta or been featured on BBC World, America 24 and other channels. Much continues to be written about their smart, sassy, well-trained drivers from low-income families.

Yet, some of these companies are struggling to make ends meet. Take the case of Viira: its chief executive, and Roy’s fellow shareholder, Preeti Sharma Menon, says the business, started in 2011 with an investment of Rs 1.7 crore (British businessman Lord Ghulam Noon is an angel investor), is running at a debilitating loss.

Management attitude is key: The management’s approach and perspective are key towards shaping the organisational culture. The tone at the top is essential when it comes to mitigating fraud in businesses and dealing with issues related to compliance.

Induce a collective conscience: The ethical fabric of an organisation is critical for the creation of sustainable business practices. It is therefore important to develop a code of ethics encompassing the organisation’s core values, which will drive a sense of responsibility into every business association. This will help deter the eventuality of misconduct at an innate level.

Training across levels: The formulation of an ethical framework would be incomplete unless employees don’t understand it. Hence, it is necessary that every employee should be given the right training, as it plays a key role in emphasising the company’s commitment towards curbing fraudulent practices. Ultimately, these sessions ensure that employees are attentive about dos and don’ts and conduct business responsibly.

Thomson Reuters Foundation brought the spotlight firmly on the kind of robust support systems that social entrepreneurs need through a chat with Intellecap CEO – Anurag Agrawal on the sidelines of Sankalp Unconvention Summit 2014.

Mumbai: Impact investing firms, which invest to deliver social benefits alongside financial returns, have put $1.6 billion (around Rs.9,600 crore) into India since 2000, mostly in companies in sectors such as healthcare, micro-finance, and financial inclusion, according to Intellecap, a social advisory and investment banking services firm.

The number of foreign investors looking to invest in the social sector has increased, while domestic investors show a reluctance to contribute to impact investing funds, said Nisha Dutt, director, consulting and research at Intellecap, which released a report on the matter at the Sankalp Unconvention Summit 2014, Asia’s largest social enterprise platform, last week.

“There is a lot of capital that has started coming in and once the money is coming in it has to get deployed; it is the coming of age of this industry,” said Dutt.

Sankalp Unconvention Summit 2014 kicks off today in Mumbai drawing more than a thousand people from over 30 countries.

In its sixth year now, the event is an initiative of Intellecap’s Sankalp Forum. The first-ever impact investment landscape report for India will be unveiled, detailing how $1.6 billion has been pumped into more than 220 social enterprises since 2000.

Titled “Invest. catalyse. mainstream: The Indian impact investing story”, it will showcase how 60 per cent of the capital has been invested in 15 enterprises alone, with microfinance, healthcare, agri and clean energy sector initiatives receiving about $341 million.

“The funds go to entrepreneurs and pioneer investors targeting underserved geographies and communities as well as championing newer business models. From this kind of angel funding, which is hard to access in India, enterprises are nurtured to be potentially attractive to mainstream investment firms,” says Nisha Dutta, Director of Consulting Services at Intellecap.