With a larger fund to invest from, Gray Ghost Ventures, a US-headquartered impact investment venture capital firm, hopes to make a bigger play in the social enterprises space, putting in more money and backing a larger number of start-ups.
The VC firm hopes to achieve final close of its $60-million third fund in 3-4 months, having already raised half that amount. For this fund, Gray Ghost Ventures has moved from foundations from which it raised money for its first two funds and is targeting large companies, particularly in financial services space, according to Arun Gore, President and CEO.
The reason for this shift is that the impact investment space is growing with more ventures catering to the under-served segments of the population coming up. This needs investors with deeper pockets, says Gore, who grew up and studied in Chennai and lived in a house on what was then Mount Road, a stone’s throw from the star hotel we are meeting at.
In consulting space too A science graduate from Madras University who completed his chartered accountancy from a Chennai firm, Gore moved to the US to do his Master’s in Business Administration and also obtained a couple of other Master’s. He was in the consulting space for some time before getting into the impact investment.
According to Gore, a number of financial services and insurance companies and other large corporations are interested in investing in the third fund. Once the third fund closes, Gray Ghost Ventures will have $110 million under management, the first two funds were $15 million and $35 million in size. Gray Ghost invested in a total of 17 enterprises, mainly in sub-Saharan Africa, South Asia and a few in South America. The third fund’s focus will be entirely on sub-Saharan Africa and South Asia, according to Gore. It has started looking at a few ventures and hopes to begin investing from the fund shortly.
Investment plan Gray Ghost Ventures invested $1-2 million in eight ventures from the first fund and $3-4 million in nine ventures from the second fund. It now plans to go up to $6 million from the third fund. Its focus has also changed. The first fund, as Gore puts it, was more of investing from the heart. It was purely social in nature and the fund invested in “whatever felt good.” There was enough proof that these companies were growing and Gray Ghost decided to scale up its investment. “Our ownership interest went up. We started investing in larger enterprises. Our focus changed. We call ourselves a performance-driven impact investment firm,” says Gore.
According to him, all of Gray Ghost’s investments will be in ventures that use the mobile platform to deliver products and services. The focus in the third fund will be on financial inclusion, as in the previous two funds, and healthcare and education. Internet penetration is increasing, smartphones are becoming cheaper and it is easier to reach a larger number of people through mobile than through the traditional system of knocking on their doors, he says.
Gray Ghost Ventures is almost always the first institutional investor in every company it invests in, because of which, says Gore, it always gets a good pricing. The VC firm has a pipeline of 400 companies, but invests in three, or at the most four, ventures a year. By limiting the number of investments, it is able to pay greater attention to its portfolio and give all the time the entrepreneur needs to grow the business. It will look to pick up 20-25 per cent stake in the companies it invests in. It has had two exits so far from its earlier investments.