Exclusive: US-based impact investor Village Capital eyes Asia expansion this year

Deepak Menon of Village Capital

With over 17 investments already made in India, US-based early-stage venture capital firm Village Capital is now planning to expand its reach to other parts of Asia.

“2018 will be a year where we would like to collaborate with partners who are interested in taking our model to other parts of Asia,” Deepak Menon, Regional Manager, South Asia, Village Capital told DEALSTREETASIA.

Village Capital runs on an accelerator-cum-investor model with a focus on five sectors – agriculture, financial inclusion, education, health and renewable energy for its investments in the US, and emerging markets of Latin America, Africa, and India.

While it currently invests out of a global $17.7-million fund, the investor may look at a separate vehicle for Asia or India. However, a decision on that would be taken once it nears the full deployment of the current vehicle.

“I think a separate Asia or emerging markets merits a separate vehicle, but it’s a question of the kind sectors that we look at, the companies we want to invest in, what makes most sense for us,” said Menon.

“Globally we do different structures of investment. In India, we do only equity, since the fund is based in San Francisco, we can only follow the equity model. In Africa, Latin America and US we do a lot of debt, and in the US we also do revenue share, and if I were to raise a separate vehicle in India, then I would also want to do that keeping in mind the sectors that we work in, I would love to explore other structures to work with in India beyond equity,” he added.

In India, Village Capital has invested around $50,000 per company, but it has gone up to $75,000-100,000 in other regions.

Globally ,Village Capital runs an accelerator programme for 10-12 entrepreneurs and uses a peer-selection method to decide the ventures it will invest seed capital in. The entrepreneurs go through 3 workshops, each 4 days long, spread over 3 months.

Village Capital’s investment readiness programme operates as a non-profit, while the funding is done through Vilcap Investment, the venture capital firm that comes in at the end of the programme.

Village Capital has roped in partners such as Michael & Susan Dell Foundation, Omidyar Network, Blackrock and PayPal who either want to invest or seek branding, or may want to provide entrepreneur support.

“In India, our current count would be around 17, including last years investments, and we’ve had three exits. We’ve just finished our education programme so we have two more investments in progress. We will finish our fintech programme in February, so we will have another two out of that. By mid-2018, minus the exits, we should have about 18 investments,” estimates Menon.

Some of its portfolio companies include Simpa Networks, a solar home system manufacturer; SevaMob and iKure in healthcare services and virtual reality startup Simulanis Tech.

For its expansion into Asia, the investment firm plans to take a sector-specific route rather than focus on individual countries.

“Just looking at the landscape, for example for agriculture other parts of South Asia—Nepal, Bangladesh, Pakistan, there is a lot that we can do in a pan-South Asia programme. For Fintech it could be Singapore, Hong Kong, and for financial inclusion, in general, it could be Indonesia, Philippines. Across the region, you could do a lot. We are not following the model of taking the next one or two countries – we are following a thought process of if we were to go outside India, we should look at it sectorally,” said Menon.

“It could be South Asia or South East Asia or elsewhere, but it has to be a sector where we could be of value and get partners with local region expertise and who could guide us geographically on specific pockets in the region, where we could find a good pipeline for that sector and then we could build a pipeline around that,” he added.

The company is in talks with potential partners to take its programmes to other parts of Asia. According to Menon the partners need not only bring funding but may also find value in interacting with our entrepreneurs. They could collaborate with accelerators and incubators in other regions, where Village Capital’s curriculum could come in as complementary to them, or corporates and foundations who may want to tap into the company’s expertise.

Impact investment has been gaining prominence not only from niche investors but also from mainstream investors. According to a McKinsey report, impact investments in India have demonstrated an ability to employ capital sustainably while meeting the financial expectations for investors. This has resulted in impact investments in India topping $1 billion for the second year in a row in 2016. The value of impact investments reached $1 billion for the first time in 2015, and surpassed that in 2016 with $1.1 billion investments.

Also Read:

Village Capital invests in Logic Roots & Project Mudra

Impact investments in India don’t mean lower returns for investors: McKinsey

Impact funds in India not scaling fast enough