Since 2011, Upaya has pioneered investing in and consulting with small and growing businesses (SGBs) to promote job creation for the poorest of the poor in India. Upaya is particularly committed to investing in women-led businesses that employ women, who currently make up 55% of the employee base of its portfolio companies. Upaya has invested in 11 companies that have collectively created 2,623 jobs as of June 2016. These companies are on track to double that number by the end of 2016 to 5,000 jobs. By the end of 2019, Upaya commits to tripling the number of jobs created to 15,000 by adding an additional 10 companies to its portfolio and ensuring that half the companies in its portfolio are led by women.
Upayas unique approach includes seeking out early stage entrepreneurs who share the commitment to employ the poorest of the poor. Very often, Upaya is the first non-family investment the entrepreneur receives to grow their business. In addition to a seed stage investment of approximately $50,000, Upaya staff works closely with the entrepreneur and their team to develop an understanding of the businesss unit economics, financial management, and growth potential. This work prepares the entrepreneur for later funding from impact investors. Other investors have demonstrated their confidence in Upayas selection and support by providing nearly $4 in follow-on investment for every dollar Upaya invests.
A challenge in working with very early stage companies is the intensive and customized consulting support required to understand their industry and their unique business challenges. It is also a challenge to predict the growth path for very early stage companies without subjecting them to burdensome due diligence exercises. Working one on one with businesses has been effective for Upaya but not efficient. With this commitment, Upaya is proposing a new sector-themed cohort approach that will allow Upaya to work with five times as many companies and to select our investees with greater confidence.
Upaya will limit its investments into three sectors in the next three years: agribusiness, skilling (formalizing the informal sector), and labor-intensive manufacturing. For each of these sectors, Upaya will select eight to 12 businesses to participate in a six-month program in which Upaya staff and industry experts will provide valuable training on financial management both in a classroom setting and through hands-on customized support. The objective of these three workshops will be to understand the businesss economic model and growth potential. At the end of the six-month program, Upaya will select one to three businesses for seed stage investment and also provide a showcase for other impact investors interested in the sector. Over three years, Upaya expects to work with 50 companies and invest in 10 of them.
This new approach will allow Upaya to create new partnerships with industry experts and investors whom it imagines participating in its cohort selection, education and ultimately co-investing.
Upaya has created a calendar of five six-month cohorts over three years; Upaya anticipates running concurrent cohorts in the third year. In 2017, Upaya will run a Skill Building cohort from January through June, followed by Agribusiness from October through March 2018. The next cohort, Skill Building 2, will run July through December 2018. In 2019, Upaya will begin a cohort on Labor-intensive Manufacturing in April that will conclude in September; its second Agriculture cohort will run July through December.
The basic program of each cohort will follow the same model. Upaya will identify a group of industry investors and subject matter experts who agree to help Upaya to select a group of 10 applicant companies through a competitive process. This process will begin in October 2016 to identify 10 companies in December for the Skill Building cohort that will launch in January 2017. Upaya will lead workshops and one on one coaching on financial management and investment preparedness in three weeklong programs in New Delhi. The Upaya team will conduct at least one site visit for each business as well as provide a coach/mentor through the process. The cohort will culminate in an investor showcase in June 2017 during which Upaya will announce the companies in the cohort receiving Upayas investment. Each subsequent cohort will culminate in the announcement of Upayas investments.
By the end of 2017, Upaya expects its two new investments to create 333 jobs while its existing portfolio will produce 7,714. By the end of 2018, Upaya expects the four new investments to create 666 jobs while its existing portfolio will reach 10,287. By the end of 2019, Upaya forecasts that new companies and current companies will exceed 15,000 cumulative jobs created for the poorest of the poor in India.
With the recent adoption of the United Nations Sustainable Development Goals (SDGs), we have marked the beginning of a new era of international development. Gender is a central feature of the SDGs Outcome Document; it is highlighted as a standalone outcome and goal (SDG 5), and is integrated throughout the agreement. Never before has addressing gender inequality been so integral to a global development commitment.
In order to advance gender equality targets, Upaya Social Ventures is joining a holistic coalition of multi-sectoral partners convened by No Ceilings, Vital Voices, and WEConnect International, focusing on three core issue areas of work: 1) Promoting Womens Economic Participation; 2) Addressing Violence Against Girls and Women; and, 3) Advancing Womens Leadership in both Private and Public sectors.
Over 400 million people (World Bank, 2010) in India live in extreme poverty and struggle daily to meet their basic needs. Steady, reliable employment eludes this population and the ultra-poor cobble together informal sector jobs like manual labor, shoe-shining, and trash picking to earn a living. Income from one day to the next is highly unpredictable, and this prevents households from building a stable foundation, saving, and planning for the future.
These households are unemployed or under-employed, conditions that prevent them from making long-term progress out of poverty. Most popular development interventions - including microfinance - do not serve the ultra-poor, as this is a highly vulnerable segment with special needs. For decades, the ultra-poor have been served by aid programs providing handouts - such as free food and healthcare - under the assumption that the poor need rehabilitation before they can earn a living. But the Upaya teams experience has shown that the ultra-poor can become self-reliant and quickly address their own needs simply by having access to a stable job.
Jobs, however, are created by employers, and throughout these extremely poor communities the entrepreneurs who are ready to be those employers struggle to launch and grow their businesses to create such jobs. Often, owners of small and growing businesses (SGBs) working in communities far off the beaten path cannot attract seed funding and support. Local banks do not invest because of the lack of collateral, and other potential investors - such as venture capitalists - are simply not interested in such small investments. They view investments into SGBs as too risky because the business models are unproven and require a longer investment horizon. Due to the lack of investment capital, poor communities are often devoid of SGBs and hence suffer from persistent unemployment and lack of opportunity.