Move aside Web2.0 and Hi-tech: VCs to finance bottom-of-the-pyramid projects in India.


Yes, Venture Capitalists across the globe are now chasing the projects of and for the low and middle class consumer segment in India. Venture capitalists see this segment as the future for making big money. Take the example of Mightylight’s project, which provides $50 solar powered lights that replace the kerosene lamps used by majority of poor people in Indian Villages?
The villagers for whom these have been installed are thrilled due to non-recurring costs and savings.
MightyLight is the brainchild of New Delhi-based Cosmos Ignite Innovations, a Stanford University-incubated startup by Matthew Scott and Amit Chugh that aims to provide simple products for the world’s poorest people. This project is backed by biggies like Vinod Khosla, a veteran Silicon Valley venture capitalist.Mightylight Solar Powered light
Until recently, the Venture Capitalists were only interested in funding Tech startups in developed countries and urban cities. But now, the VCs are suddenly flocking to a territory that was disliked and shunned by many till now.
The Venture Capitalists such as US based Matrix Partners are looking at funding projects in consumer services, health care, financial services, travel, media, and entertainment sector in countries like India. The VCs have plenty of opportunities here with very low competition unlike the technology sector where even they are chasing projects with money in their hands.

There have been slew of VC funding recently in such projects – like Sequoia Capital India’s investment of $11.5 million in SKS Microfinance – a company based in Hyderabad who provides microfinance solutions to women clients in India. It offers mid term, individual, income generating, and emergency loan products, as well as term life insurance schemes.

Others like Clearstone Venture Partners, based in Santa Monica, Calif., have put $5 million into DigiBee Microsystems, who are into selling low-end mobile phones to poor Indians.  The investments in such kind of projects were unheard of earlier, but VCs see the large poor and lower middle class consumers in India as one of the most attractive markets worldwide.
The other two California Venture capital funds Walden International and New Enterprise Associates are planning to invest $5 million in Novatium, a Chennai-based company that has developed a $100 personal computer which is targeted for the poor but educated people in India.
I have been part of many entrepreneurial forums, and am seeing plenty of new innovative ideas and projects coming up. VCs are chasing them with money, with some entrepreneurs even refusing to get their project funded.
This is an amazing time to start a project; it is just matter of time before you will find VCs chasing to give you money!

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  1. Abhishek Sinha says

    India has a population of approximately 1.136 billion people of which 72.2% live in rural areas. A majority of these people including low income people who live in urban areas do not have access to the banking system as opening an account is a major hurdle.

    Eko India Financial Services Private Limited ( – startup company based in Delhi, India is looking to extend banking facilities in these untapped/un-banked areas through the use of mobile phone as a channel (currently there are over 200 million mobile phone subscribers (GSM & CDMA). Eko is looking to ensure greater financial inclusion and increase the outreach of the banking sector as envisaged by RBI – the Indian Federal Bank through the use of Business Correspondent Model.

    Eko’s unified approach to financial services will address two key challenges – ubiquity and comprehensiveness of range of financial services. Often financial services with the focus for financial inclusion have resulted in high transaction & servicing costs, inadequate collection & use of customer information, and a focus on credit based services leading to the exclusion of more needed services including Savings.

    The need is for a secure & convenient system that offers choice & customer delight. The most fundamental need is a savings account. Eko plans to integrate and create an ecosystem which greatly leverages existing infrastructure to enable a very low cost “No Frills Savings Account”. Eko plans to execute widespread distribution, in partnerships with banks, of these very low cost “No Frills Savings Account” under the “Business Facilitator and Business Correspondent” regulation from RBI.

    We are integrating an infrastructure for widespread distribution of “No Frills Savings Account” (NFSA). Eko Cash Points are retails points who have existing “Prepaid Recharge” business. 24×7 pharmacies will be ECPs providing 24 hr services. Eko Relationship Officers are individual who have full KYC (Know Your Customer) compliance and minimum 1 year of “good” banking record. Such individual would be “introducers” to customers who have limited KYC. This is a mandatory requirement defined by RBI regulations for customers with limited KYC to open “No Frills Savings Account”.

    The only infrastructure which will be created grounds-up is going to be the Eko Operations Center (EOC). EOC setup may be distributed in early days of operations in a city/region and would be consolidated once the distribution setup is integrated and in full swing of operation. ECPs and EROs are not working full time for Eko. It is an added source of revenue for them. This model has been inspired by various “agent models” deployed across the globe.

    The complete ecosystem is energized by the technology platform. The technology platform adopted is MIFOS, which has been developed by the Grameen Foundation and has been deployed by more than 18 MFIs across the globe.

    Once the customer requests for creating the account, the ERO in the same locality is notified. The ERO visits the customer at her/his residence and gets a form filled. Subsequently, ERO brings the customer to the ERO Facilitation Center where the customer is photographed as part of the KYC information and a starter kit with a signature booklet and operating manual (comic) is handed over. Once these procedures are completed, the customer’s account gets activated and now the customer can deposit and further withdraw money at ECPs.

    The ECPs are expected to keep a security deposit against which they can mobilize deposits. The security amount is flexible and it is the limit to which the respective ECP can mobilize deposit.

    Eventually, multiple value added services would be offered to the members, including more credit and savings product apart from transactional services.

    Initially starting with No-Frills Savings Accounts, Eko later intends to have three lines of business; platform, membership and payment. Eko has signed Letters of Intent with three banks including a large MNC bank and two Indian private banks to do a pilot at Uttam Nagar, a low income area in west Delhi. The pilot project is scheduled to go live in the 1st week of December.

    Eko aims to become a $1 billion market cap company by 2011. This will require Eko to be a $100million plus revenue company with clear visibility to $1 billion in revenue by 2015 with good profitability.

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