Earlier this month, US-based impact investor Accion Venture Lab raised a $33-million (Rs 238 crore) fund where it is mobilising $23 million for a co-investment vehicle with third-party investors and a $10-million investment by the global nonprofit investor Accion International. The firm aims to invest about 30% of its new fund in South and Southeast Asia including India, where it wants to tap into the huge underserved demand for financial services.
In an interview with VCCircle, Accion Venture Lab managing director Vikas Raj explains the firm’s investment thesis, how it helps entrepreneurs and its India activities. Edited excerpts:
What led to the idea of setting up Accion Venture Lab?
Venture Lab is a seed-stage investor in startups around the world that are using new technology and business models to expand access and improve quality and affordability of financial services for the underserved. There are three billion people around the world who do not have access to a full suite of financial services. Of these, 1.7 billion don’t have any kind of access—no account and no financial service provider in their village or their part of the town.
Accion Venture Lab was started after the realisation that in many developed and developing markets, the penetration of technology like internet and mobile have far outpaced the penetration of financial services. And there was an opportunity to exploit that delta which has been ignored by the financial system at large.
Many early-stage startups which use technology to driver innovation are not getting funding from mainstream institutional investors, and it is not surprising because they are too risky.
Also, they are trying to work in a sector where regulations are very opaque and where it is hard to make unit economics work because of small loans. It is fundamentally very expensive to identify and serve the customers.
We were built to find phenomenal entrepreneurs who were innovating this way and provide capital to them so that early-stage startups can test their models and get to the point where later-stage commercial and impact investors would find them attractive.
So, a big part of our model is to find such great companies, institutionalising them, helping them with core operating and strategic issues, getting involved with governance and readying them to raise further capital. We started investing about six-and-a-half years ago and we have had some success in supporting these companies.