13 Mar Five Questions with the Ennovent Circle: Sumantra Roy (Part 1)

The Ennovent Circle is an exclusive community of impact investors, specialist service providers and mentors that collaborates to accelerate innovations for low-income markets. In this monthly series we highlight one of our Circle members and ask them five questions about their work in low-income markets and their insights about the sector.   For our latest post in this series we spoke to serial entrepreneur and angel investor Sumantra Roy.  He is the Co-Founder & CEO of Learning Yogi, which is developing a game-based learning platform to help underprivileged children teach themselves. Another of Sumantra’s ventures, formed in association with Dr. Sugata Mitra (the founder of the Hole in the Wall project), is developing a chain of financially sustainable learning centres based on the Hole in the Wall model.   In part 1 of this interview, Sumantra Roy speaks about his introduction to the social impact space, his investment philosophy and his views on the renewable energy sector in India.

You are a successful entrepreneur yourself. What led you to invest in enterprises working with lower-income groups in India? How were you introduced to the social impact space?

I got introduced to this space rather recently when I was in the process of starting my own social enterprise called Learning Yogi. We are planning to distribute low-cost tablets containing our game-based learning platform in low-income urban and rural communities. That’s when I discovered that there were a large number of other social enterprises that were looking for angel and private equity funding. Investing in them was my way of giving something back to society over and above what I was doing with Learning Yogi.

Do you believe that social entrepreneurships can generate revenue whilst creating long-term social impact? What is your Investment philosophy and returns expectation?

I see revenue generation and social impact as two sides of the same coin. You aren’t generally going to be around long enough to have long-term social impact unless your social enterprise is financially viable because grant funding – while helpful – can only take you so far. And if your social enterprise is financially viable, what it indicates is that there are enough people in the BOP communities that you are targeting who are voluntarily paying for your product or service because they see value in it, which generally means that you are creating social impact.

My returns expectations are composed of a combination of the kind of social impact I expect the companies I invest in to have, and financial returns. From the perspective of financial returns, I am happy to receive an average level of risk-adjusted returns as long as the companies also deliver on their social impact goals.

Apart from the usual things that most investors look for in an early-stage company before they invest in it (the quality of the management team, the potential size of the opportunity, possible sources of sustainable competitive advantage etc.), I also tend to like companies that meet a couple of additional criteria:

1. Companies whose business plans are not overly dependent on receiving ongoing subsidies or other forms of ongoing support from the government, as I don’t believe this is a sustainable way of either building businesses or creating impact.
2. The entrepreneur is prepared to make large sacrifices in order to realize his/her vision. For instance, I once looked at an early-stage social enterprise whose financial projections called for a 4-fold increase in the salaries that would be paid to the founding team once they received funding – i.e. salaries that were similar to what they might have received if they worked with MNCs. Now I am all for early-stage entrepreneurs drawing salaries that are enough to meet their day-to-day living expenses, but investor funds at that stage of the company should primarily be allocated to growing the company and not paid out as salaries to the founding team.

Along with Ennovent Circle members, OPES Impact Fund and Rianta Capital, you invested in clean energy access company Boond. Tell us more about why you invested in Boond and where do you see the renewable energy sector in India heading in the next few years?

I invested in Boond because of 3 reasons:

1. I believed in the entrepreneur behind the company (Rustam Sengupta).
2. They had done an excellent job of understanding who their customers were and what those customers wanted.
3. While I expect many segments of the solar energy industry value chain to get commoditized in the future because of increasing competition (which is great for consumers but not so great for the companies themselves), Boond has strategically positioned itself in the value chain in a way that is going to be hard to replicate by a potential competitor.

I am not particularly familiar with any sector in the renewable energy space other than solar, so I am going to limit my comments to solar. I believe solar energy can be an excellent source of low-cost energy for BOP populations in the future because solar energy costs are going to decrease significantly in the future. So, from the standpoint of social impact, I see a lot of potential in it. However, from an investor’s point of view, the key is to figure out which segments of the solar industry value chain are likely to get commoditized and which aren’t, and to invest in the latter.

Consider joining the Ennovent Circle to collaborate with members such as Sumantra Roy and successfully place capital in high impact social ventures.