Just When You Thought the World Bank Won’t Fund Startup India
Rarely do you hear the United Nations, the World Bank and its related agencies getting in touch with the startup community. Then out of the blue came IFC and invested in Byju’s, the learning app. With that investment, the IFC kicked off their agenda in Startup India in proactive fashion rendering financial support and the strength of their reputation to allied entrepreneurs and even novice institutional fund managers.
The IFC, the International Finance Corporation, is of course a member of the World Bank which since 1956 has leveraged $2.6 billion in capital to deliver more than $265 billion in financing for businesses in developing countries.
Ruchira Shukla directs the venture capital investments made by the IFC in South Asia. Here’s what Ms Shukla says about IFC’s new found vigour in startup investing:
1. When one thinks of startup investments, one does not usually think of the World Bank Group. Could you please describe how startups fit into IFC’s priorities?
IFC is the private sector investment arm of the World Bank Group and has been active in emerging markets since its inception six decades ago. At present, we are invested in more than 2000 companies across 120 countries.
I lead IFC’s venture capital business in South Asia. IFC’s venture capital team has been active in emerging markets globally. We make direct equity investments in startups and as a limited partner (LP) in venture capital funds. Our sectors of focus include consumer internet, edtech, healthtech, cleantech, and B2B ecommerce. We invest between $5 million and $25 million as an initial equity cheque and continue to support our portfolio businesses in subsequent funding rounds.
2. What are the direct equity and fund investments IFC has made in South Asia so far?
We have invested in BigBasket and Lenskart in the consumer internet space; Portea, EyeQ, and Nephroplus in healthcare; Byju’s in edtech; Power2SME and Moglix in B2B ecommerce; and Blackbuck in the e-logistics. Among early stage VC funds, we are investors in Pi Ventures, Stellaris, and IDG.
3. Why is IFC investing in startups and how does this further the World Bank Group’s development agenda?
Digital inclusion plays an important role in economic development. The rapid penetration of internet, increasing adoption of smartphones, and drop in data prices have enabled digital access across income and demographic segments.
Technology innovation can disrupt traditional industries by making supply chains more efficient, improving access to data, and providing actionable insights into customer needs and how they can be served at a low cost. Such innovations can expand the reach of essential products and services.
Several of our portfolio companies are creating huge development impact. EyeQ is operating 43 eyecare centres in 37 Tier II and III cities and serving more than 340,000 patients a year. The Byju’s online learning app is being used in more than 1,700 towns. Power2SME has more than 50,000 SMEs registered on its platform. And Blackbuck has more than 10,000 truck owners using its platform to find business at the best prices.
4. Where does IFC expect to find new investment opportunities this year?
Health is an important sector for us. The Indian market suffers from a low penetration of health insurance resulting in high out-of-pocket expenses, which can be a significant burden on middle- and low-income households. Moreover, India’s healthcare resources are stretched in trying to care for the large number of patients. We are constantly looking at new technologies that enable affordable diagnostics and care in remote areas.
Personalized medicine is an important space with the promise to make healthcare more effective. We track companies in the genomics space to identify potential winners.
Another interesting area is B2B e-commerce, where a lot needs to be done to streamline supply chains using technology and data. We will look for businesses that help improve access to products in Tier II and III towns by using local distribution networks.
We are also looking at digital solutions in local languages that enable the next 100 million Indians to access content and services online. There are many startups trying to build businesses in this space and we are looking at their services and business models.
5. What types of VC funds do IFC look to support?
We invest in VC funds focused on series A and series B funding. We are keen on funds that invest in the areas that fit into our development priorities. We recently invested in Stellaris, which makes series A investments with selected follow-on investments in series B and C. The fund focuses on mobile-led disruption in large verticals, digital enablement of Indian SMBs, application of emerging technologies to India-specific problems, and global SaaS leveraging the India advantage. We have also invested in Pi Ventures, a seed-stage fund with investments in data sciences, machine learning, and artificial intelligence – all are solutions that disrupt traditional businesses in healthcare, energy, and financial services.
