The Situation

Growth in India has been disproportionately concentrated in industry and services Rural and semi-urban India is lagging behind the rest of the country - These regions are afflicted with poor infrastructure, low levels of education, lack of literacy, among other problems

Annual GDP Growth by Sector

10.0%

8.0%

6.0%

4.0%

2.0%

0.0% 1982-1992 Agriculture Industry Services 1992-2002

The Solution

Entrepreneurs can solve big problems

The most difficult problems in the world do not have obvious solutions
They require creativity and tenacity

Entrepreneurs have the necessary traits:

Vision Determination Resourcefulness Creativity A willingness to change direction when necessary

Entrepreneurship creates positive change

Entrepreneurial Efforts

Employees
Great opportunities Greater income

Consumers
New products, services

Shareholders
Increased wealth

Government
Additional tax revenue Reduction in social benefit need

General Economy
Secondary and tertiary creation of opportunities

We need to unleash the power of entrepreneurship on the problems facing rural and semi-urban India

Entrepreneurship in India comes in three forms

Types of Entrepreneurship

Individual
Entrepreneurship driven by instincts to survive
Vegetable vendor Cattle rearing Tea Stall

Micro & Small Enterprises

Small to medium businesses with scope and employment
5-100 employees Relies on internal business sense to succeed Currently with limited financial support Need USD $20K to $250K Generally rely on personal funds, family, friends, and money lenders

Large Markets
Large businesses with large scope and employment
Typically run by highly educated managers Exit markets well understood

The area of microfinance Supported by small loans between USD $50 - $200 Debt structure; short payback period Proven area for finance

Significant conventional venture capital support Need USD millions in equity Primarily service export or urban focused Proven area for finance

Micro and small enterprises are the key, but receive the least support
Entrepreneurship Type
Individual / Microfinance

Synergy w/ Rural and Semi Urban India

Flexible, meets local requirements Demonstrated ability to scale numbers of individuals Microfinance an established and growing industry

Dis-synergy w/ Rural and Semi Urban India

Limit to impact Skills of great entrepreneurs not dispersed to others Diminishing returns with market saturation

Micro and small enterprise / informal sources

Can provide value added employment to multiple people Only need one entrepreneur for multiple increases in income Flexible tailored to local market and infrastructure requirements

Hamstrung by lack of capital and business building support

Large markets / mainstream venture capital

Can mobilize crores of rupees quickly Brings most sophisticated business experience Commercial venture capital entrenched in India

Scale requirements limit flexibility Limited understanding of rural and semi-urban India Rural and semi-urban India unlikely to be attractive currently

Micro and small enterprises are the best current option for entrepreneurial development in rural and semi-urban India

 Aavishkaars role

Micro and Small entrepreneurs lacked needed capital and strategic support
Skill / Resource Source

Product / service Idea

Operational capability Team Local market knowledge Flexibility

Entrepreneur
Entrepreneur Entrepreneur Entrepreneur Entrepreneur

Capital funding
Strategic support

Outside source
Outside source

Aavishkaar provides the missing pieces during the businesss lifespan

Initial Idea, Business Formation
Entrepreneur conceives idea Often a small proprietorship Generally micro or submicro in size

Business Growth

Maturing business

Larger sustainable enterprise

Business enters small stage Pursues growth opportunities to get to medium and large size

Business plan to grow business past micro stage Requires more infrastructure, addition of new products and services Increase in headcount

Business growth slows Focus on profit and efficiency

Entrepreneur works with team

Aavishkaar provides financial support Aavishkaar provides business building support

Aavishkaar provides strategic and operational support

Other investors join

Aavishkaar wants to demonstrate that private capital can be used to support the growth of these enterprises
Target 32% per investment return while furthering development Overall fund return should entice other private sources to enter rural and semi-urban India Private capital is the only source large enough to meet the scale of Indias need
- Social capital markets too small - Government does not understand private business sufficiently and is often compromised by political concerns