Social Businesses Attracting Venture Capital

There is good news pouring for those of you whose business satisfies a social or environmental cause. If you thought funding is hard to come by for social ventures, think again! For, there is a pool of social venture capital funds which are on the rise investing in diverse social sectors such as microfinance, NBFCs, rural upliftment and rural healthcare, among others.

In 2015, social or impact venture investors infused about $95 million across 53 deals, as per data available with research firm Venture Intelligence. Deal activity increased 8.2% compared to 2014, which had witnessed 49 such investments valued at $106 million.

In terms of value, there seems to be a blip. But the number of deals has witnessed a jump in the last few years which goes on to show how investors are increasingly getting comfortable clinching such investments. For example, the number of deals sealed in 2015 was highest in the last 5 years. However, since there has been an overall correction in terms of valuation, the value of total investment amount has come down. Also, since social businesses are also increasingly mushrooming, the requirement of funds there is typically small. Earlier social VCs would infuse capital only in larger businesses catering to a social cause.

In 2011, social venture funds invested $122 million in 36 businesses. In the subsequent years, the number of deals witnessed a rise even as the total investment amount came down.

The larger sized investments during 2015 included the $15 million investment in Swarna Pragati Housing Microfinance led by investors including Zephyr Peacock, Omidyar Network, Aavishkaar Goodwell and Intellecap Impact Investment Network; and the LGT Venture Philanthropy led $8 million investment in dental clinic chain myDentist.

Of all the social deals that have been sealed last year, cities down south received the most amount investment, followed by west and then north and east India. In terms of cities, Bangalore topped the list, while Mumbai stood at the second position followed by Delhi, Chennai, Hyderabad and Koltata.

Experts say going forward, social VCs are here to say and will increasingly find a niche place as they evaluate a business on its social and environmental performance as well as its financial success. In fact, with so much stress being laid on financial inclusion for growth, lots of innovative ideals are coming attracting VC interest across diverse sectors.