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?
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.
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!