A Savvy Perspective: Pools of Capital Allow for Customized Support and Larger Impact Creation

The following interview with Gagandeep Bakshi, Director & Head of Investment Banking at Intellecap, occurred as a follow-up to the ‘Innovative Financing for Social Entrepreneurs‘ round table discussions in Cairo.

SIEMENS STIFTUNG: One topic that repeatedly came up during the round table discussion is the need to customize supporting programs that are targeted towards social entrepreneurs. Obviously this is not easy for cost reasons. What are your thoughts on how we can address the need for more customization?

Gagandeep in conversation with Technology Exchange Lab’s Parker Chastain at epRoundtable in Cairo

GAGANDEEP: With our work at Intellecap, we specifically realized in India and Africa that the enterprises don’t necessarily follow the same pattern and they don‘t necessarily have the same kind of challenges or problems. The single problem that they all face is capital, right? And to that extent, you cannot say that any kind of capital fits them all because their problems and challenges are all very different. So, one of the things we have always been pushing for is the appropriate distribution of capital instead of giving a grant. Let’s create pools of capital that are long term, and have the ability to give them different kinds of capital.

So when we work with ecosystems, we try to address the capital challenge by coming up with broader or more innovative vehicles that address the capital needs of the entrepreneur.

SIEMENS STIFTUNG: When you say “capital”, are you talking about equity investments, or is it a specific type of (patient) capital that you have innovated?

GAGANDEEP: What we do at Intellecap is design vehicles that allow innovative capital to come to enterprises. I would call it patient capital in the sense that the outcome should be patient for sure, but the intention is to give different types of capital to the same enterprise (or different enterprises) based on their growth journey and capital requirements. There are many agribusinesses that need short-term working capital for a tight seasonal demand and/or supply. And there are maybe healthcare companies that might need long-term capital because the healthcare structure or the enterprise takes a lot more time to break even than an agribusiness, which is based on a season. So giving every enterprise the same kind of capital does not make sense. It should be patient capital but it should have the ability to give different kinds of equity, debt or a returnable grant, if I can call it so. In those pools of capital, I could have long-term debt from OPIC, but I could also have large foundations that have also put in some capital which does not re-quire any return but just the principle back. The idea is that you should keep your cost of capital for the enterprise as low as possible, but only to the extent of how low your cost of capital is that you are taking from the limited partners or from the funders across the globe.

SIEMENS STIFTUNG: You participated in the round table about public private partnerships. Regarding the pools of capital that you just described, could they also be put within a frame-work of public private partnerships?

GAGANDEEP: Absolutely. One needs to understand that public private partnerships have to be used in a certain way. Many entrepreneurs who have a dependency on the government for re-venues have failed for some time and that‘s a major learning even for companies in India. So we need to work with the government to better utilize the existing infrastructure that the government has, rather than depending on the government to give you revenues, because in many cases the government has actually failed in delivering in terms of the milestones of the revenue payments to the enterprise and enterprises have suffered a lot in the last 10-15 years.

SIEMENS STIFTUNG: What is your experience with social impact bonds as a vehicle that provides enterprises with public sources of revenue? What are the crucial success factors?

GAGANDEEP: The intent of social impact bonds is very good, but we see a bottleneck in emerging countries regarding the size of social impact bonds. While providers of capital (by way of impact bonds) have made a significant amount of capital available, we see challenges in the deployment of such capital because most impact enterprises are very small in size.

Gagandeep at the epRoundtable discussing Public-Private Partnerships

We need to work towards this and one idea is that we can create a pooling asset, where we have all early-stage enterprises pool their demand of capital into one vehicle which is able to raise large amounts of social impact capital. The providers save the cost of managing each enterprise’s capital, and the entity which has pooled the capital will be able to do that job on behalf of the providers of capital.

SIEMENS STIFTUNG: Thank you very much for these insights, Gagandeep!

Gagandeep Bakshi

Gagandeep Bakshi is the Director and Head of the investment banking company, Intellecap, located in Mumbai. His 18+ years of expertise encompass the areas of corporate finance, capital raising and M&A advisory, covering experience in sectors like financial services, healthcare, agriculture, cleantech and infrastructure.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!
Confirmation requested
Our website uses the "Google reCAPTCHA" to prevent spam comments. Since you have not given your general consent to cookies, you must confirm that you want to comment and that you agree to allow cookies to be set and data to be transferred to Google.