Nurturing innovations

SPOTLIGHT: Funding profitable micro ventures won Mumbai-based Aavishkaar the coveted World Business Award, 2006.

Vineet Rai of Aavishkaar dared to go where no man wanted to go in India. His idea of funding commercially viable micro-innovations got him laughed out of every office, including the SEBI office in Mumbai. But that was in 2001.

Since then, Rai's passion has seen him raise the full corpus of Rs 5 crore, six projects being funded and won him the coveted World Business Award for 2006, constituted by the UNDP, International Business Leaders Forum and the International Chamber of Commerce, Paris.

How much has he invested so far? Rs 1.5 crore. "There is no dearth of innovative projects in India. Rather, we don't have the time and the resources to do due diligence on all the proposals we get," says Rai, who runs a shoe-string operation. "It is only this year that we have even taken an office. Till now, every one was working out of their homes or mine!"

Aavishkaar fills a niche, positioned as it is between microfinance and traditional venture capital funds with equity support to small businesses. Aavishkaar's funding is in the range of Rs 5 - 50 lakh.

"No one wanted to invest in the fund initially. Even SEBI insisted that we must raise the whole Rs 5 crore corpus before we got registered as a venture fund. But I persuaded them to register us when we were at the Rs 3 crore level," says Rai.

His initial investors were angel investors like Anantha Nageshwaran, a Singapore based NRI, who today runs the Aavishkaar International which channels funds collected internationally into Aavishkaar India from Singapore.

Rai discovered his passion for micro finance quite by accident. Bored with his career as a forest officer, he quit the service and applied everywhere, including the Gyan Foundation and ended up working with the legendary Anil Gupta.

But quit soon, to set up Aavishkaar. "We didn't see eye-to-eye. Anil was more interested in the innovations and I was more interested in making them commercially viable."

At Aavishkaar, only innovations with a commercial potential are funded. "We have lost money only on one project out of the six we have funded. So far our rate of return is around 25 per cent on capital invested," says Rai.

Aavishkaar made its first investment in Servals Automations, Chennai-based innovators in licensing and patenting as well as marketing their innovations.

It has also invested in Tide technocrats Bangalore, a company that works on Micro and Pico Hydel projects to provide electricity in remote areas. The latest funding is to a group of NGOs which supply fabric to Fabindia.