‘Jugaad innovation’ has a long way to go to get funded: Arvind Agarwal, CEO, C4D Partners

Agarwal spoke to indianexpress.com on the challenges faced by social businesses in India, ‘jugaad innovations’, how tech has been leveraged to create impact in people-first social enterprises, and about his investee companies which have used innovative tech for creating social impact. Edited excerpts:

Venkatesh Kannaiah: We hear a lot about ‘jugaad innovation’ in India. Why is it that such innovation rarely gets funded?

Arvind Agarwal: While innovation, or “jugaad” as we call it, is necessary and is very interesting on the surface, we must realise that it will only be investable if it shows the potential to generate positive outcomes for investors and other stakeholders.

Also, to infuse money into such innovations, we require a formal institutional structure like a company or an organisation with a robust business model, which is mostly lacking. We find that most of these innovations come from individuals and depend solely on their enthusiasm and attitude. It might not be bankable in the long run.

For impact investors, it is all the more challenging because it is difficult to find a truly unique innovation that will also create either social or environmental impact. (Express Photo by Jithendra M)

Such jugaad innovations are mostly positioned to receive grants from governments or foundations. But when it comes to investors, this is also a reputational risk and therefore requires a lot more commitment than a grant. For investors or funds, there is also the question of whether the company and innovation have the scalability and the ability to absorb funds. Many times, it is lacking.

For impact investors, it is all the more challenging because it is difficult to find a truly unique innovation that will also create either social or environmental impact. There is no model to identify and validate such innovations and the impact that they can generate.

Venkatesh Kannaiah: Is technology and impact through technology a core part of impact investing?

Arvind Agarwal: At C4D partners, it is people first and profits next. Technology comes third. We understand that technology can be an enabler for efficient business processes, but we believe it is not the core of any business. At the core of any business model should be its purpose. Moreover, our understanding is that technology does not work well in all environments, particularly Indian rural environments. Many problems in the rural sector and in the informal sector are related to livelihood issues, for which technology is not the immediate answer.

Venkatesh Kannaiah: There is a lot of discussion about digital public goods and how these could in due course resolve some intractable issues like climate change. What are your views on this?

Arvind Agarwal: Digital adoption in India has witnessed tremendous growth in the past decade, and digital public goods such as UPI, have surely brought in a sea change. But while digital penetration levels in urban areas have been impressive, it is not the case in rural areas.

I think technology will help in improving operational efficacy for businesses, and by enhancing traceability and trackability also help in reducing greenwashing to a large extent, helping generate meaningful impact.

In the long run, digital public goods like UPI and products based on it in the health-tech or agri-tech sectors would generate a substantial impact. However, in the short to medium term, we feel that the tech for the bottom of the pyramid consumers needs to be visualised in a different way. The gap is huge, and product offerings and solutions need to be designed to suit the underserved populations.

For instance, look at education as a sector — it has now become edtech, which has an urban middle-class focus. Similarly, look at agriculture as a sector, which we now call agritech — how many farmers are actually able to access and use these new technologies? Just adding the word ‘tech’ to a sector does not really help the sector.

Venkatesh Kannaiah: Can you tell us about a few of your investments in India which created impact using tech?

Arvind Agarwal: Many of our social business investments have leveraged technology to grow their businesses.

One of our investments in India, LabourNet, is a platform for the skilling and upskilling of informal workers. It has now transformed itself into a tech platform for compliance and online training of such workers. Several SMEs in India face a huge burden of compliance issues when dealing with the informal labour force, and they do not have the capacity to manage the compliance issues.

Leveraging technology, LabourNet has developed an online platform called SAHI to resolve the issue. What started as a blue-collar skilling initiative is now an automated workforce management system with digital job sheets, automated attendance, performance tracking, and digital payment transfers, driving change and profits.

Another one of our investee companies — 1Bridge — provides last-mile assisted e-commerce services for rural consumers. It has leading e-commerce companies as its partners and has trained village youth to procure products for rural consumers and provide services from mobile recharge to money transfer on the 1Bridge platform. The social enterprise is also looking at becoming hyperlocal by leveraging opportunities through the Open Network for Digital Commerce (ONDC).

1Bridge also has a VR App that helps rural consumers experience products much better in a 3D environment and tracks consumer behavior with an analytics backend, providing interesting insights into consumer behaviour. They have also created a blockchain-based model for generating trust scores based on consumer transactions.

There’s also our investee company Freyr Energy which works in the solar energy sector. The solar rooftop sector is a very fragmented one, filled with either mom-and-pop shops of different service providers or large corporations that service big companies. Freyr has introduced an innovative tech platform to link their channel partner network and household consumers, ensuring efficient services, and leveraging technology to create an outsized impact.

Venkatesh Kannaiah: How big is the impact investment ecosystem in India, and which areas are they focussed on?

Arvind Agarwal: It is very difficult to predict the amount of funds in the impact ecosystem in India. For example, of late, there are a lot of funds and venture capital firms which claim that they are also investing for impact. But if you look closely, they are all in the traditional investment model. Most of it is claims and a lot of green washing and gender washing goes on under this so-called impact investment by traditional venture capital players.

Today, as an impact fund manager, I have supported over 15 social enterprises that are working toward creating sustainable livelihood opportunities for underserved communities across the country. (Express Photo by Jithendra M)

Venkatesh Kannaiah: On the impact investment ecosystem, you talk of a lack of a common impact measurement framework and lack of a standardised structure. Can you explain?

Arvind Agarwal: There is no defined way to measure in depth the impact that an investment is creating. Everyone has their own metric. Unless there is a common impact measurement framework, then we are comparing apples and oranges most of the time.

In terms of the legal framework, too, there is a need for clear demarcation in the matter. Those who work on real impact, livelihoods and diversity should be clubbed together.

Venkatesh Kannaiah: What brought you to impact investing?

Arvind Agarwal: I grew up in Purulia, West Bengal witnessing the struggles of the underserved regions in rural India. From a very young age, I was determined to leave those struggles behind to become a person who could contribute back to society.

After a two-decade career in the private equity sector, I decided to go back to Purulia and set up my own business, a rural BPO, that would employ rural youth and uplift the underserved region. The business failed, but it was a blessing in disguise as I moved on to the impact investments sector, working for one of the global impact funds.

Today, as an impact fund manager, I have supported over 15 social enterprises that are working toward creating sustainable livelihood opportunities for underserved communities across the country.