Based on my long-standing experience as impact investor in India I would like to suggest that Official Development Assistance (ODA) coming into the country is disbursed more strongly towards capacity building (training, education) and supporting the incubation of viable social enterprises and inclusive businesses catering to the “Base-of-the-Pyramid”. Investing into this area of the Indian economy would not only help alleviate to poverty and at least partly solve some of the grave environmental problems the country is facing. Such an initiative could also help India’s corporate sector become more engaged in creating and scaling innovative solutions in the areas of technology or financial services that could open up new markets for them.

1. ODA for Capacity Building in
the Social Enterprise- and the SME-Sector
in India
Dr. Martin Vogelsang
9th December 2015

2. Introduction
Official Development Assistance (ODA) coming into
the country should be disbursed more strongly
towards capacity building (training, education) and
supporting the incubation of viable social enterprises
and inclusive businesses catering to the “Base-of-
the-Pyramid”.
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3. 3
Total Finance

4. Introduction
Investing into this area of the Indian economy would
not only help alleviate poverty and at least partly
solve some of the grave environmental problems the
country is facing. Such an initiative could also help
India’s corporate sector become more engaged in
creating and scaling innovative solutions in the areas
of technology or financial services. This again could
open up new markets for them.
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5. A Step-by-Step Approach
Investors complain about the lack of a pipeline of viable
investment targets because there is not enough early-
stage seed funding. Here is what needs to be done:
• Allocate more public funds for launching de-central
incubators.
• Boosting start-up and mature social enterprises by
mobilizing public and private sector investment. 5

6. A Step-by-Step Approach
• Make infrastructure projects at the “Base-of-the-
Pyramid” attractive for the private sector.
• Linking start-up and mature social enterprises with
product and service providers to create synergies
developing business models and products.
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7. How to make this development sustainable
• Creating long term policies, modern and efficient
tax administration and sufficient amounts of
infrastructure investment.
• Domestic Resource Mobilization (DRM) - the process
in which countries transparently raise and spend their
own funds to provide for their people - by mobilizing
more public and private resources to finance invest-
ments on projects in agriculture and agribusiness. 7

8. How to make this development sustainable
It will be key to coordinate all resources mobilized
from the public and the private sector to invest into
this kind of social-enterprise/inclusive business
incubation programme.
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9. The Current Situation…
There is a mismatch between the two sides of the
social enterprise spectrum – funders/investors on one
side and social enterprises on the other. Government
and other players need to fill the “missing middle”
between very early stage social enterprise models
and more mature models. Here ODA could play an
essential role.
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10. 10
A range of foreign and domestic players have
deployed capital in the impact market
Type of Investors Estimated Number Examples
Fund Managers >50 Aavishkaar, Acumen Fund, Elevar, Khosla Impact,
LGTVP
Development Finance Institutions(DFI) 10-12 ADB, CDC, DEG, NABARD, FMO, KFW
Foundations, HNWIs & Family Offices 10-12 Michael & Susan Dell Foundation, Omidyar Network
4983.4
417.6
20.1
Impact Capital by Investors ($ Mn)
DFIs
Funds/Fund
Managers
Foundations
3344
1294
6.6
Debt
Equity/Quasi-
equity
Guarantee
DFI
96.2
299.4
Non DFI
Impact Capital by Instrument ($ Mn)
Source: GIIN Report

11. Social
consulting
platforms
Free lancers/
Subject matter
experts
Volunteers/Fellows
Consulting
Firms
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Internal support
(human capital)
Advisory support (human
and intellectual capital)
Employees
Development
institutions
Large family
foundations
High net worth
individuals
Microfinance
institutions
Social enterprise
incubators
Impact
investors
CSR
Capital support (finance
and intellectual capital)
Social Enterprises
For
profit
Hybrid
Non
profit
Mission Driven
Existing support mechanism
- Intensely market driven
Market driven
Direct engagements with social enterprises…
Individuals and Organizations
- Mission driven

12. 12
…resulting in deficit of capital for organizations operating in
sectors that have not already been de-risked…
11% 50%*78%
Source: Indian Impact Investing Story, India’s Social Enterprise Landscape, Intellecap; Financial Management Capabilities Survey, Upaya social Ventures
60%*70%*
Financial
Inclusion
Top 15 Social
Enterprises
Microfinance
Sector
Investments flowing to only one sector
hoping for “investment homerun”
Mission driven organizations struggling
to become investment ready
Fund Crunch Investible
organizations
*Percentage of total impact investment in 2014
Financial, intellectual and human capital support appears to be thinnest where it is
much needed to promote innovation and improve deal flow

13. 13
Market-driven top down approach is broken and has failed
to create value for mission driven organizations
….Conceptualized our upside down investment model

14. How such an Incubator works:
… Incubators need to work closely „on the ground“ in
order to get a more in-depth understanding of the
needs and the aspirations of the people that they
serve. Such a programme can only be understood in
combination with long-term organizational
development and change.
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15. 15
How such an Incubator works…
Mission driven
individuals
Incubator Initial funding for
organization
Building last mile
sensitive organization
On track to
create lasting impact
• Aligning the team on clear set of
strategic and operational goals
• Capacity building for customer
acquisition and business
development
• Applying new tools and practices to
the organization’s highest priority
• Financial planning and budgeting
• Project planning
• Generate dialogue among
stakeholders to channelize impact
capital
• Market research to educate funders
• Strategic advisory and
implementation support for portfolio
organizations
• Digital strategy
Mission to actionable plan Rigorous on ground implementation
Human capital development Intellectual capital development Financial capital development

16. 16
An Incubation Platform creating symbiotic partnerships between the
ones bringing change and the ones with resources to bring change
Impact Investors
HNWI
Social Enterprises
NGOs
Non
profit
For
profit
Donor
organizations
Beneficiaries
BOP
Urban
poor
• Maximum impact creation
• Evaluation reports
• Performance of SEs
• Impact evaluation
• Feedback from beneficiaries
• Strategic focus areas
• Feedback
• Progress and impact statistics
• Areas of improvement
Fund flow
Foundations
Participants
Where and how to invest
How to create maximum
impact
How to improve living
standard
• Select most effective
organizations
• Develop grant making process
• Capacity building
• Implement strategies
• Gain market intelligence
• Acquire funds
• Knowledge transfer between
SEs and beneficiaries
Incubation
Platform
Value flow
Standardized processes
Investment management solutions
and Asset management
Expert advice and
mentoring
Monitoring and
evaluation support
Data analysis Audit and
governance

17. The Effect:
Here is a practical example of the needs that such an
ODA-funded incubator could fullfill: VIKAS/SAVE is
developing and installing solar pumps for salt-workers
thereby creating large social and environmental impact.
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18. The Effect:
Due to a lack of capital to invest into technology and
service development VIKAS/SAVE is one of the many
social enterprises that could profit immensely through a
social business incubator funded through ODA:
https://www.youtube.com/watch?v=tp6wSrojH78&featur
e=player_embedded
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