Arun Venkatesan
Arun Venkatesan is Co-founder and CEO of Villgro USA, a global network of social enterprise incubators. Till June 2019, he was CTO of Villgro India, leading their health sector investments. He has over 15 years of experience in materials R&D, device development and forward integration of technology into tangible, marketable entities. He has a Ph.D. in Chemical Engineering and has done post-doctoral research in fuel-cell materials development and micro-fuel-cell fabrication.

After about 2 decades of product development work in the US, he worked in India for 7 years. He has worked for various small-scale and start-up companies both in the US and India, in a product development capacity leveraging academic research groups and independent development teams. He has extensive experience coordinating development projects using external vendors for rapid turn-around of various product components.

His current focus is the development of affordable and sustainable products for BoP. More recently, his teams have successfully commercialized ‘Brilliance - A low cost phototherapy device for premature babies’ and ‘SmartCane - An affordable navigation aid for the visually impaired’. He also led three projects in assistive devices funded by Wellcome Trust. He is part of judging and design review panels for CII and ASME iShow to evaluate companies and their ideas.

Linking entrepreneurs to a diverse group of investors to deliver impact

Interview with Arun Venkatesan, CEO of Villgro USA
South Asia
8. Feb 2022

Villgro USA is a global network of social enterprise incubators. Villgro’s work began 20 years ago in India, where 21.9% of the population still lives below the poverty line. Villgro funds, mentors and incubates early-stage, innovation-based social enterprises that impact the lives of India's poor.

How can access to a broader group of investors help smaller and inclusive businesses grow and scale their impact?

In this context, two things are very important: access to significant capital and incubation support. These are early-stage businesses that need access to support services from ESOs, Entrepreneur Support Organizations. Villgro plays a double role: we have some seed capital we can deploy, but most of our value lies in handholding and incubation support.

If there is a broader group of investors, the idea gets tested from multiple points of view and diverse networks are opened to these companies. The word gets around, and exposure to many other groups of investors happens. So, a broader and deeper pool of capital becomes accessible. I think that is the way to scale social impact.

We have always believed in sustainable business models for delivering impact. That means access to different types of capital are also needed, including early-stage seed grants, working capital loans, and venture investment as the company is mature and starts growing, and many in-between components in that spectrum. I think access to this diverse group of investors helps the company mature faster, opens up significant capital, and also tests the idea much faster. You get such powerful intellectual capital behind this when different groups of investors look at it.

Can you tell me a little bit more about your recent partnership with Artha Impact and the joint launch with iPitch?

iPitch has been around for some time and our partnership with Artha as the implementation for the investments has been in place for many years. This year, Artha became a platform partner in supporting iPitch. I think they bring increased focus on the pipeline of impactful enterprises. They are excited about gaining access to and hosting such a pipeline, and subsequently access to incubation support. At first we at Villgro were just incubating and dispensing seed capital and highlighting mature enterprises, and then we formed our own social impact fund as well. We have expanded to this huge pool of iPitch applications; iPitch gets anywhere from 1,200 to 1,500 applications every year. And we are very excited that Artha has started partnering with us earlier on in the pipeline, earlier on in the incubation process. For us it is a highly valued long-term relationship.

African man looking at market data on a tablet
iPitch helps investors find impactful enterprises. Image provided by Villgro

What challenges do investors face if they are looking for a pipeline of inclusive businesses with social impact? And how does iPitch help address these challenges?

Assessment bandwidth is something investors have very little of, as they are looking at many, many deals in a day. And I just mentioned that we get something like 1,200 applications from innovative enterprises in iPitch, out of which we shortlist, grade and filter out about 200 to 400 for a deeper look and subsequently about 20 for investors to look at. By filtering in relevant and mature ideas with high potential, for consideration by investors, that extension of bandwidth happens right away.

We help access diversity and breadth across India, and depth of knowledge because we bring in our partners into the assessment process. iPitch also gives the investors the flexibility to shape their agenda. Because iPitch is sector-agnostic, it gives our investment partners the flexibility to build their themes into this platform. It is a win-win because if we are able to serve impact investors better through this platform, then the interest in the platform kicks off too and Villgro also benefits. There is quite a bit of de-risking that also happens, since Villgro also co-invests in addition to the assessment.

What are the sectors where you have seen the most interest from investors? And does this vary by country for example? And what are your expectations on how this might develop in the next year 2022?

I would say agribusiness is a sector of interest. We also have a health focus, – specifically, innovative health solutions for the base of the pyramid. We have a large programme called ‘Powering Livelihoods’ in Cleantech through productive use of energy, alternative, renewable sources of energy. Solutions for the productive use and efficient use of energy, deployable at scale for the base of the pyramid is a key interest. If you look at cross-cutting themes, we are looking at post-pandemic recovery for sure, and we are looking at gender-lens investing and gender-positive investment practices.

I don’t want to restrict the innovators’ focus to only a few sub-sectors, but I would be happy to mention some of them in different geographies. Villgro Africa focuses quite a bit on life sciences-themed approaches to healthcare. There is also a trend emerging especially in the post-pandemic situation towards food security. A lot of health focused and agribusiness focused activity is happening in the Philippines through our Villgro Philippines hub and another area of focus there is reproductive health and rights.

Villgro is also looking at equity in the entrepreneurial system. We are looking to globalize our efforts to address underrepresented entrepreneurs. We see investors also looking at addressing inequities in the entrepreneurial system, so that value can be delivered.

The next question is particularly important for entrepreneurs struggling to address investors. Are there some tips you could give to them on how they can best showcase their social impact to attract investors?

Looking at investors as customers and projecting value to investors is important, so put on your investor glasses and look at what value you are delivering to them. I’m using the term ‘investor’ very broadly, so, it may be a granting agency, a funding agency, it may be an impact investor, or it may be a seed grant from an incubator. So, understanding what their areas of interest are, what value means to them and mapping that to your offering is very important.

Being honest about your place in the value chain is also important. All of us understand that one small enterprise at this ‘early’ stage is not going to completely deliver impact, but being transparent and knowledgeable about where in the impact chain you fit and how well you are delivering that part of the impact is important. Then, if you are presenting that to the investor, the whole story is understood. It opens you up for a lot of questions about how feasible that chain is. I think that honest conversation really helps the investors decide.

men working at Strawcture
“Strawcture Eco”, a green building material company, was one of the winners of iPitch 2020. Image provided by Villgro

As the number of ESG and climate-themed funds has increased, so have increased concerns about greenwashing and transparency. How important is measuring impact therefore in order to mitigate ESG-washing or greenwashing?

I am speaking from experience: my own experience. Villgro, after 20 years of being in the business, has begun to realise the many multi-faceted aspects of impact measurement. It’s a two-way street: If investors and funding agencies clarify the kind of impact that they’re looking for, then there is less chance of greenwashing. The second point is about enterprises being honest. Understanding what part of the impact value chain you are addressing, and being transparent about that, helps position you well. You may be doing impact washing or greenwashing unintentionally. So, transparency avoids that and it helps you draw on the wisdom of the ecosystem. You may be missing key aspects of the value, the green value, of your business. This is where having a plan for measuring impact and being razor sharp about the value proposition is really important. Doing a little bit of research on the customer and beneficiary and where they all fit into the continuum of impact is important. I would say, a good twenty per cent of the effort of a social enterprise will go into impact measurement, if not more.

From the investors’ point of view, to eliminate greenwashing, it may be good to build in resources and funding for impact measurement in the funding they offer. From the point of view of an entrepreneur support organisation, it’s important to be knowledgeable about and leverage their own impact measurement to fit specific themes and also expand to fit cross-cutting themes. For SE’s, I think it’s important to build in impact measurement and clarify the target audience and the beneficiaries in their operational plan. A lot of times, building in some metrics that will measure and highlight progress towards the impact or green goals is important.

Is there anything you would like to add? Is there still anything you would like to let entrepreneurs know?

Villgro is an ecosystem builder in addition to being an incubator and an investor. So, we have a training programme on incubation, sharing best practices. We have also built a tool called VITALS that manages the incubation workflow. There is a diligence and monitoring aspect to it, but the most convenient aspect is that the impact metrics are built into the system. So, I ask entrepreneurs to make sure, like business metrics, impact metrics are also measured. We are constantly updating dimensions of this metric and we’re happy to share our best practices with the ecosystem. So, if anyone is interested, they can be part of our training programmes, they can leverage and request a customized installation of our workflow management system, or our impact measurement modules. So, we’re happy to share knowledge, resources; everything that will help the ecosystem.

Thank you so much.