UPAYA FUNDAMENTALS
In this blog series, members of the Upaya team dive into the what, why, and how of Upaya’s mission to lift people out of extreme poverty with dignified jobs.
Anuradha Jayaraman, Senior Manager, Investment & Portfolio Management
Around four years ago, when I was looking out for roles in investing and visited Upaya’s website for the first time, what stood out for me was the clarity on what Upaya considered impact – job creation for the poorest of the poor. The website mentioned Upaya’s mission to create jobs and to find the right entrepreneurs to achieve this goal, and I instantly wanted to learn more.
I was curious about how Upaya found these entrepreneurs and evaluated their impact and business potential. Four years and many learnings later, I can confidently talk about just how interesting and challenging this process is. The narrow impact definition is what helps us stay true to our mission but at the same time, finding the right entrepreneurs who fit this narrow definition is not easy.
How Do We Find Entrepreneurs?
Every year Upaya conducts an accelerator program for a cohort of 10-12 businesses with the objective of making them “investor ready.” We conduct a focused outreach for this program for two months at the beginning of the year, so the first quarter of every year is filled with excitement (and nervousness) as we wait to find out what kind of applications come in. It gives us a lot of insight on the current market trends and also helps us find out if there are new and emerging sectors that can become job generators.
Each company that applies generally meets the following criteria:
For-profit company
Early-stage – less than 5 years old
Hasn’t raised prior institutional funding
Creates jobs for the poorest of the poor, or significantly improves incomes by employing them
These companies have progressed beyond the idea stage and have a proof of concept in place with a few paying customers and are now looking for their first round of funding to scale.
Selvakumar Varadharajan of Laymen Agro presents his business model at a workshop during Upaya’s 2018 Accelerator Program
Business Models and Sectors
Over the years, we have narrowed down the sectors that we should focus on – namely agriculture, skill development and rural manufacturing. These are typically the sectors where we have seen that there is a lot of potential to create jobs and improve livelihoods.
We don’t, however, bind ourselves to these sectors and are constantly on the lookout for other industries that have livelihood potential. This was the logic behind the experiment we tried out this year when we decided to put together a sector-agnostic cohort for our accelerator program. We learnt about new sectors that had job creation potential, such as logistics and rural tourism. More on that here>>
Amit Antony Alex and Anuradha Jayaraman conduct a site visit with the ZooFresh Foods team in western Odisha.
Our Key Requirement: Social Impact
As investors, we want to ensure that the companies we invest in have viable business models that can scale and can provide us exits with returns. However, what distinguishes Upaya from other investors is our emphasis on finding companies that align with our impact philosophy.
The previous post in our Upaya Fundamentals series explains why we place such a strong emphasis on measuring the impact of the jobs our partner companies create. Likewise, when we evaluate companies, we conduct one round of filtering with purely the impact goal in mind. We attach weightage to not just the number of jobs created but also the quality of jobs – in terms of the steadiness of income, seasonality, and other employment opportunities available to the jobholders. A few areas that we consider critical are:
Scaling Impact – We start by understanding how aligned social impact is with the business. Job creation should be embedded in the business model and/or organization mission. A good way to gauge it, as summed up by an expert speaker at one of our workshops, is that the business metrics and the impact metrics that the company tracks should be one and the same.
Focus on the extreme poor -- This is by far the toughest to evaluate. Our mission is to create jobs for people in extreme poverty — those living under $1.90 USD per day. However, we understand that it is unrealistic for businesses to exclusively target or provide employment to the extreme poor. At Upaya, we conduct impact studies on our portfolio companies. Even within our portfolio, different businesses impact different percentages of people living in extreme poverty. How high that percentage is depends on geography, sector, model, scale potential, etc. We evaluate companies based on where they’re located and what segments of the population they employ. We want to see that the majority of their jobs are made available to the most marginalized people in their communities.
Quality of impact -- Another factor that we assess is the quality of impact. We evaluate potential for and evidence of skill development, income stability, and asset creation in the business. We have also seen cases where the income the jobholder receives from our investee is seasonal, but in terms of his/her total income during the year this income is substantial enough to lift them out of extreme poverty.
Feedback from jobholders - It is very difficult to gauge impact from applications or calls and meetings with entrepreneurs. We invest a lot of time and resources in visiting the operations on the ground and speaking to the jobholders. We take cues from the interaction of the entrepreneurs with the jobholders to understand just how passionate they are in making a difference to the latter’s livelihoods.
The process we follow is rigorous, and puts a lot of pressure on the team as we criss-cross India trying to find the right entrepreneurs. At the end of the day, the effort is worth it because it helps us build a truly unique portfolio of job-creating businesses that create a lasting economic legacy in their communities.
