 "Vineet Rai: A rolling stone")
Vineet Rai, 45, had an unexceptional childhood. With his father who was a hydro-geologist working for the government, young Rai lived a typical middle-class life, never exposed to much luxury in life. The family moved from one town to another; he attended nine schools and passed out of a relatively unknown public school in Jaipur.
Having lived a number of years in Jodhpur – where you see the army at close quarters – that was the extent of his ambition. Once he was old enough, he tried to get into the army and failed three times. Not to be deterred, he tried every other service (the air force, the navy) too. None worked out for him.
Why, I ask? How can one fail so many times? Are the forces that hard to crack? “Probably a bit of immaturity; maybe I didn’t have the right fit they were looking for.” Whatever the reasons, he had to finally come to terms with the fact that a career in the army – something he always wanted – was unlikely to materialise.
A friend’s father suggested he apply to the Institute of Forest Management in Bhopal. He cleared the examination and joined the institute – attracted more by the beautiful campus than what he would learn. After finishing, he was hired by Ballarpur Industries to manage forests in Odisha (paper is made out of bamboo and wood, so forests have to be managed).
He spent three-and-a-half years on the job, living in the forest surrounded by wild animals including cobras and kraits, both in the house and outside it and thoroughly enjoyed what he was doing. But Rai had got married along the way and when he was expecting his first child, his wife put her foot down – it was simply not the safest place to bring up a small child.
So at 26, he found himself job-hunting once again. “I applied for every possible job – right from a car salesman to jobs in Muscat and it seemed clear nobody needed a person with a degree in forest management who’d actually spent time in a forest.” At that stage he requested Ballarpur Industries to transfer him to Delhi.
Fate at some point must have heard him because he got a call from IIM Ahmedabad which was looking for a “research associate who had worked with a company and had lived in the forest” – a pretty unusual requirement – for a project on bio-diversity. That’s when he met Professor Anil Gupta who offered him Rs 6,000 a month to work with them. Ballarpur gave him leave without pay and he went and joined IIM Ahmedabad.
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“How were you surviving on Rs 6,000 with your wife and child?” I ask. “Don’t ask me that because I survived on even less than that much later on,” he says. In 1997, he had rented a house at Rs 2,800 a month and says they managed fine. But after living life in the wild like a cowboy and driving Jeeps in forests, his work at IIM seemed a bit too tame for his taste.
After one year, he learnt that the government of Gujarat was setting up an incubator called “GIAN” and he decided to apply, although he didn’t know what an “incubator” was. In Ballarpur, he was an executive so he applied for the job of a manager of the incubator, went through the interviews and managed – much to his surprise – to land the job of the CEO. In June 1998, he joined as the CEO of GIAN at a princely amount of Rs 17,000 a month.
For the next three-and-a-half years, he worked on finding innovations done by farmers and converting them into businesses and he enjoyed what he was doing. A critical learning he had there was that every Indian has 10,000 ideas in his back-pocket; it’s converting those ideas into reality where the real challenge lies.
He also realised that for rural India to compete with urban India, it needed both capital and talent. “Just giving money to people is not going to build businesses,” he says. Rural India needs “high-risk capital with high-quality talent” to flow there. “This was my bright theory” and based on it he made a presentation to the board of GIAN – full of powerful chief and additional secretaries and other senior bureaucrats. The board listened and then told him that he had been hired for something and he should stick to that. “But by that time I knew that what I was doing was not going to deliver massive results,” says Rai. He’d also become more ambitious.
Meanwhile, there was a set of people – Anantha Nageswaran and Arvind Singh, both former students of IIM professor Anil Gupta in Singapore – who said they’d like to support Rai’s ideas. The duo paid for Rai’s ticket to Singapore (he couldn’t afford his first-ever visit outside of India). They invited around 50 local Indians and asked him to give a presentation before them on taking risk capital to rural areas. (It was christened Aavishkaar by one of the person present in the meeting.)
Rai came back, quit GIAN in August 2001 and with Rs 4,000, registered the fund Aavishkaar in October 2001. To complete his theory, he took the risk and borrowed Rs 1 lakh from his wife and started a company, “Intellecap” or Intellectual Capital, in 2002. Aavishkaar’s role was to provide venture capital to change the face of rural India, while Intellecap was to inspire talent and intellectual capital to make it happen.
He knew he had to move base from Ahmedabad, so he drove his wife and son in his Maruti 800 to Mumbai in 2002 and set up home there. “It was just foolishness, but this is what I did,” he says. He had no money, he had a wife and a small child to support and he’d put all his savings in an idea that might or might not fly.
To cut a long story short, it took him five years to raise Rs 5 crore (from 2001 to 2005) from 110 individuals, mainly by word of mouth, on the premise that the money would be invested in social enterprises and would also give returns to the investors.
Along the way, Rai had many learnings – one of which was giving good people who are trying to change the world money and expecting them to build a business is a tough task. “Good people are focused on doing good and the business suffers in the process,” he says. Venture capital is not just about giving money; you must also help build and grow the business and figure out how to get your money back. “Otherwise you are not in venture capital, you are giving grants,” he explains. He also figured that Rs 5 crore is a very small amount and India is a very large country, so he had to (scale in geometric progression) quadruple his efforts in multiples.
In 2003, his daughter was born and his wife was quite worried that the whole thing was going nowhere. They had two young children and no savings whatsoever. Rai, whose monthly survival was in question, realised he was going bankrupt.
That’s when Vijay Mahajan – founder of BASIX and mentor to Rai – who was staying with him told him he was suffering from what he called “martyr syndrome” (sacrifice to change the world), the most useless of the syndromes to have. His point was that he – Rai – couldn’t help anybody if he couldn’t help himself.
It was Mahajan who showed him the light, saying that microfinance (in 2005 microfinance in India was just around Rs 500 crore; today it’s worth Rs 60,000 crore) is going to turn for profit. Rai had helped Vikram Akula in building SKS as a friend and consultant on the side and could see where microfinance was heading. He was also on the board of another microfinance company in Uttar Pradesh at Mahajan’s behest.
Mahajan pointed out that Rai was one of the few people at the time in India in 2004 who understood both venture capital and microfinance. He suggested he marry these two: a lot of people knew microfinance but they didn’t understand risk capital, equity, leverage, debt, cash flow and returns.
Guided by Mahajan, Rai’s Aavishkaar started to invest, while Intellecap became the champion of microfinance and for preparing it to attract venture capital. In the first year, they had a turnover of Rs 45 lakh, which grew exponentially every year after that.
In 2007, Rai managed to raise $14 million in Aavishkaar. “I was 35, smarter and more mature,” says Rai. He’d also realised he had to go out and reach investors; nothing was going to fall into his lap. Intellecap raised $8 million and that allowed his wife to make part sale of her stake. She was happy since she felt with that money she would be able to secure their children’s future and Rai could be free to do whatever he wished.
“My thought process was to set up companies from Bikaner in Rajasthan to Khurda in Odisha – in every nook and cranny – that would create jobs, livelihood and access to reduce the vulnerability impacting lives of millions.” He also invested in a large number of microfinance institution, including Equitas, Utkarsh and Suryoday.
Several foundations (like the Rockefeller Foundation) invested as the idea was then quite novel: using venture capital to bring about change in the lives of the rural population. Large government funds, like Germany’s KfW, IFC, CDC and the Dutch FMO, also invested.
In turn, Rai started investing in companies that would take risk, make impact, grow and make money, then sell the stake they owned and return the money borrowed from investors. It was complicated as it had been done mainly in IT and other businesses that are easily scalable, not in businesses dealing with the rural poor.
Today, with its 25 employees, Aavishkaar – which is the pioneer of impact investing in India – manages funds of $200 million (has 50 investments as of now) and is looking at raising another $300 million. “We never accepted grants. We were always commercial,” says Rai. “We have delivered returns 2X of the capital of our first fund; we have returned half in our second fund and 40 per cent of our third fund.”
Intellecap, which had briefly got into microfinance, started working on building the whole entrepreneurial ecosystem that would be needed to make social enterprises successful. “For my companies to succeed, there have to be other investors who are engaged and interested in these companies. How else will I sell stake in the companies? A whole eco system is needed,” explains Rai.
He also realised that entrepreneurs were not looking for only what Aavishkaar was providing. They need a different kind of debt such as venture debt or merchant cash finance. So, Intellecap started three debt companies, including a venture debt company (IntelleGrow), a merchant finance company (IntelleCash) and also bought and turned around a microfinance company called Arohan in east India.
Realising the need for identifying and nurturing young entrepreneurs and showcasing them to investors from across the world, Intellecap started Sankalp – a forum that brings the two together. Rai decided to replicate everything they are doing in India in Indonesia and Africa as well.
“What does his wife think now?” I ask. “In retrospect, she says she knew I would do well,” he laughs. But, he says all credit for his success does go to his wife: she was never very demanding, knew he was a “high-risk guy,” yet she supported even his not-so-smart decisions, which he says were many. And, of course, without her loan of Rs 1 lakh, he wouldn’t be where he is today. “I was never very good at anything. I didn’t really know what I wanted to do. I was pretty clueless till I was 29, but at some point things fell in place,” says Rai. He says that those who don’t know what they want to do and who are not good enough to walk into the IITs, IIMs or the army can take a leaf out of his life.