MSME and National Innovation Council Launch The India Inclusive Innovation Fund 27th January 2014

India has key Developmental Challenges Healthcare, food, nutrition, agriculture, education, energy, water, financial inclusion, livelihoods. Globally and in India such challenges are addressed in 2 ways Philanthropy and government grants / subsidies. These can never be adequate & when the fund flow stops, the good work stops ! Corporates following global best practices commit 1% of PBT to CSR this means a company with $1 bn. revenues commits $1mn ! Routed through NGOs, managed by committed and passionate people but not efficient users of capital, with little experience of building scalable / sustainable enterprises Government handouts have similar challenges & systemic inefficiencies

Leveraging the power of Innovation Innovation has transformed our lives through: a business model that combines innovation with the dynamism of enterprise a financial construct that encourages investors to take risks inherent in innovation This model - Venture Capital - has attracted the best brains in the world to solve the problems of the affluent, vastly improving our lives Intend to use the same model to drive innovation and attract the best brains in the world to solve the problems of the poor. Creating a new class of capital willing to accept modest financial returns coupled with measurable social returns Investing in ventures that improve the lives of our citizens at Base of the Economic Pyramid, and create wealth & employment But which are profitable & therefore scalable & sustainable, thus creating significant impact , disproportionate to the initial investment India Inclusive Innovation Fund

Inclusive Innovation: Does It Work? Narayana Hrudyalaya NARAYANA HRUDUYALAYA CARDIAC HOSPITAL DR DEVI SHETTY; BANGALORE, INDIA Healthcare for the Poor WORLD-CLASS. Full-spectrum cardiac care for poorer citizens. Mortality rate at 2%; hospital-acquired infection rate of 2.8 per 1000; in line with global best-in-class EFFICIENT. Supply side process innovation reduces cardiac surgery costs to just USD 3,000/ operation (compared to USD 7,000 in India, USD 50,000 in the US) ACCESSIBLE. Revenue model innovation (micro-insurance schemes) makes surgery accessible at a few cents per month. SCALABLE. Within 3 years of founding, treating 60,000 outpatients, 7,500 cardiac surgeries; many therapies done over telemedicine. Profitable.

Inclusive Innovation: Does It Work? Narayana Hrudyalaya SELCO INDIA HARISH HANDE; KARNATAKA, INDIA Renewable Energy for the Poor INNOVATIVE. Solar-powered electricity sold as an affordable service (not as expensive product) to poorer, off-grid urban and rural customers. ACCESSIBLE. Revenue model innovation (pay-as-you-go billing; distribution through local entrepreneurs; micro-finance facilitation through grameen banks) makes electricity accessible and custom-provided at a few cents per day. SCALABLE. Sold and financed over 115,000 systems. Profitable: INR 12 mn profit from INR 170 mn revenue base, FY2011-12.

Inclusive Innovation: Does It Work? The HIndu JAYASHREE SANITARY NAPKINS A MURUGANANTHAM;TAMIL NADU, INDIA Hygiene & Livelihood INNOVATIVE. Sanitary napkins are inaccessible to 88% of Indian women: high capital costs of production (USD 500,000 per machine) are unaffordably passed on to customers. Jayaashrees simplified, UV-based technology (USD 2500 per machine) allows them to be made and sold at a few cents a pack ACCESSIBLE. Manufacturing and distribution innovation (simplified cellulose processing and sanitising technologies) makes hygienic feminine care available to poorer households. LIVELIHOOD GENERATING. Napkins and sold locally by rural housewives, in small-scale units:

Inclusive Innovation: Does It Work? INNOVATIVE. The Jaipur Foot is $45 is an ultra modern prosthetic device made of selflubricating, oil-filled nylon. It has higher functionality compare to a similar $12,000 limb produced in the US is both flexible and stable, even on irregular terrain Special feature is lightness and mobility, those who wear it can run, climb trees and pedal bicycles. JAIPUR FOOT MR. DR MEHTA, LATE MR. RAM CHANDER SHARMA & DR. P.K.SETHI; JAIPUR, INDIA World-class artificial limbs WORLD CLASS Knee Replacement developed in cooperation with Stanford University costs a mere $20 ACCESSIBLE. An open door policy for anyone with disability without any discrimination social, religious or gender. SCALABLE. 20 centers across India, serving 65,000 patients each year, an annual budget of US$3.5M.,>1.2 million limbs till date.

IIIF Objectives Drive inclusive growth by igniting innovative entrepreneurship that addresses Bottom of the Pyramid needs Mobilise capacity to identify and scale innovative solutions that will address problems of the disadvantaged Create an ecosystem of innovative solutions, business models and approaches that reach beyond IPs/Patents Balance social and financial returns, simultaneously achieving social good and economic sustainability Employment / livelihoods creation at the bottom of the pyramid will be a key bias for the funds investments Mentor, develop skills, build capacity : create dedicated support networks and education programmes for socially focused entrepreneurs Pool innovators and entrepreneurs focused on the bottom of the pyramid: partner with incubators, entrepreneurship cells, angel networks, VC Funds, etc.

Fund Characteristics Structured as an autonomous, Rs. 5,000 fund, first close Rs. 500 crores Indian Government contributing 20% ( Rs. 100 crores ) to first close through Ministry of MSME Balance contribution from public sector banks, financial institutions, insurance companies, multilateral / bilateral development agencies, Indian & global corporates, Fund Life: 9 years, extendable by up to 2 years (subject to approval of contributors) IRR: Fund will target Internal Rate of Return of 12% per annum Hurdle Rate: 8% per annum Management Fee: 2.5% declining to 1.5% based on the size of corpus Focus Sectors: Include (i) healthcare; (ii) food and nutrition; (iii) agriculture; (iv) education; (v) energy; (vi) financial inclusion; (vii) environment; (viii) technology as an enabler, etc.

Fund Characteristics (contd) Will Invest directly in BOP enterprises, across the venture development cycle: majority in seed/early tage Will also invest indirectly through other BOP-focused funds Professionally managed by world class professionals Will operate as a for profit entity, providing investors modest financial returns, coupled with measurable social returns Will Source pipeline via a multitude of on line and off line channels Will Partner with all stakeholders locally and globally, learn and share experiences Create a Model for the World to Emulate

Fund Management Governing Council Comprises eminent people from industry & govt. to oversee the thesis of the Fund Investment Committee Mix of successful business people - entrepreneurs, management / domain / industry experts, and representatives of investors & management team Management Team Comprises successful serial entrepreneurs and experienced fund managers Will get a salary and carry incentivized equally on social and financial returns

Why the Fund Should Succeed India has the right resources and competencies World-class entrepreneurs; world-class technological capabilities; worlds largest young talent pool; strong government focus Entrepreneurial bug has bitten India: a rising culture of inspired engineering and business school graduates choosing entrepreneurship over job security India has the right talent Capable of doing more with less for more Innovative approach to problem solving: beyond jugaad, focusing beyond IP: developing new business models, go-to-market approaches Aware of bottom 500 million needs that often define their own context India has the right market Worlds largest market for products / solutions for the poor Market explodes for the right offering at the right Indian price point Mobile subscribers went from 1 mill to 800 m in ten years as call rates & handset prices dropped exponentially and became affordable by the poor, creating major empowerment India right place to prove model on scale & offer to the World

Thank You For more information on India Inclusive Innovation Fund visit www.innovationcouncil.gov.in