One to Watch to raise new $20m impact investment fund for Nepal

One to Watch director Willem Grimminck
Willem Grimminck, Director, One to Watch.

One to Watch, the impact investment fund manager focused on Nepal, is aiming to raise a new $20-million fund to invest in small and medium enterprises in the development-hungry Himalayan country, a top executive told this portal.

Nepal Impact Investment Community II, the organisation’s second fund to date, is launching in the beginning of 2018 and is expected to make a final close in about 12 months.

“We have identified a specific role for us in the (Nepal) market. All the SMEs are either too risky for VCs or too big for microfinance. There is a gap and that is what this fund is going to bridge,” said Willem Grimminck, director of One to Watch, during an interaction with DEALSTREETASIA.

Supporters of the fund include Peter Tropper, the former chief investment officer in IFC’s private equity group, and the Dutch Good Growth Fund (DGGF) that supports development-related investments in low and middle-income countries.

One to Watch aims to invest in about 15 companies from the upcoming fund with a ticket size ranging between $300,000 and $1 million.

“We can have a large range because we want to invest in 15 companies and select the best five for follow-on investments,” said Grimminck.

In Nepal, One to Watch has a local team of 20 members. It supports investments in Nepal by offering administrative services and representing the investor in Nepal. It also runs an accelerator programme named Rockstart Impact that helps SMEs mature to a stage of being investable. The fund also approaches other channels for gaining access to investments.

SMEs play a vital role in the economy of Nepal, home to 28 million people, whose GDP for 2017 is estimated at $23.8 billion and has a GDP per capita of $817. Besides One to Watch, the other key investors active in the country are International Finance Corp (IFC), the private lending arm of the World Bank, and the Dolma Impact Fund.

IFC has been present in Nepal since 1956, and has pumped in over $150 million so far. It plays an active role in supporting investments in sectors such as agribusiness, transportation and trade finance. It has also initiated a Business Oxygen (BO2) venture fund for investments in high-growth SMEs in Nepal. Similarly, the Dolma Impact Fund provides capital and expertise to growth companies in Nepal.

“It is not an easy place to work but it has a lot of opportunities because it is an untapped market. Nepal has been fully relying on imports from India,” said Grimminck, talking about the opportunities that Nepal presents.

There are also local entrepreneurs educated abroad who aim to be part of their country’s development. “To me, these are actually people who are able to lead the country to a healthy future,” he said.

One to Watch had earlier raised $4 million for its debut fund, Nepal Impact Investment Community I. Its portfolio companies span agriculture, health, education and clean energy. These include Bajra Brick & Tile Industries, which produces bricks stronger and cheaper than traditional ones, Bloom Nepal School that aims to foster skill-based entrepreneurship, and a local version of Starbucks, Red Mud Coffee, that offers organic Nepalese coffee.

One to Watch has also made one exit through a buyback, Kalash Milk Industries, a milk-processing factory in Nepal. The investment was made by Ton aan de Stegge of Purplefield Investments.

Recently, Grimminck also paid a visit to Myanmar. Rockstart Impact has now opened applications for its first accelerator programme in the Southeast Asian country, hopeful to find investable SMEs in the emerging market.

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