The document introduces the India Inclusive Innovation Fund, a proposed Rs. 5,000 crore fund that aims to drive inclusive growth and address social challenges at the bottom of the pyramid through innovative entrepreneurship. The fund will be structured as an autonomous entity, with 20% government seed funding and 80% private investment. It will identify and scale innovative solutions through direct investment in bottom-of-the-pyramid enterprises and indirect investment through other focused funds. The fund aims to balance social and financial returns through employment creation and skills development, while operating as a for-profit entity.

1. The India Inclusive Innovation
Fund
January 2012
National Innovation Council

2. Driving Inclusive Innovation
• India faces key developmental challenges in critical areas: healthcare,
food, nutrition, agriculture, education, energy, water, financial inclusion,
livelihoods.
• Globally and in India such challenges are addressed in two ways –
Philanthropy and government grants / subsidies.
• However, these are inadequate, inefficient & 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 !
• These funds are routed through NGOs, managed by people who are
committed and passionate but not efficient users of capital & have little
experience of building scaleable / sustainable enterprises
• Government handouts are generally inefficient & hard to manage.
• These needs can be more holistically addressed by an inclusive
innovation ecosystem which harnesses the dynamism of enterprise
to solve the problems of the Bottom of the Pyramid through the creation
of scaleable, sustainable enterprises.

3. Driving Inclusive Innovation
• The Venture Capital construct has done precisely this and
attracted the best brains in the world to solve the problems
of the affluent
• The need of the hour is to use the same venture capital
approach and bring in the best brains in the world to
solve the problems of the poor, recognising that the
Bottom of the Pyramid (BOP) represents an investment
opportunity for both economic and social returns.
• This is the context for the National Innovation Council’s
initiative on the India Inclusive Innovation Fund
• Conceived as a PPP where government helps seed and kick
start and private sector brings finance, expertise and scale to
plug the gap of risk capital for the BoP

4. India Inclusive Innovation Fund: Vision
Innovative enterprises can fulfil unmet social needs
by profitably, scalably, and competitively engaging
citizens at the bottom of the economic pyramid:
through the creation of goods, services, employment,
livelihoods, income and wealth.
Successfully achieving this vision will unlock & unleash a
class of capital other than philanthropy & government
grants for solving the problems of the poor and create a
model for countries around the world to emulate

5. Fund 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 fund’s investments
• Mentoring / skills development / education, which will be a key
element in enabling entrepreneurs at this end of the spectrum to succeed,
will be achieved by creating a mentoring network, and special skilling /
education programs
• Help create a pool of innovators / entrepreneurs focused on BOP
by partnering / supporting incubators / entrepreneurship cells, etc.

6. Fund Characteristics
• Structured as an autonomous, Rs. 5,000 crores fund
• Government seeded (20% in phases), privately invested (80%)
• Ministry of Finance has announced commitment of Rs. 100 crore as
seed money to kick start the Fund
• Invest directly, in BOP enterprises; and indirectly through other BOP-
focused funds, (subject to applicable law)
• Invest across the venture development cycle: early-stage to scale-up.
• Professionally managed by the best talent; and operate strictly as per
the defined charter
• Operate as a for profit entity; give “targeted” social and economic
returns to investors
• Source pipeline via a challenge model (inviting solutions to specific
issues), and the field-source and broadcast model (creating an open platform
to identify, engage, and scale existing innovations)

7. The Fund Model
Venture
B

8. Proposed Fund Structure

9. Distribution of EBT
Investment and Distribution of Carried Interest Distribution of
Returns from the Fund Carried Interest to
to the EBT plus management
reserves for team
future funds.
Team 1 Team 2 Team 3 Team 4
Fund Economics
Payment of Trusteeship Fees
and reimbursement of Investment Manager
expenses Payment of Management Fees
Fund
Distribution of returns from Distribution of returns from
Portfolio Companies to the Portfolio Companies to the
Fund Fund
Portfolio Portfolio Portfolio
Company 1 Company 2 Company 3

10. Fund Details
• Minimum Target Size: Rs. Five Hundred Crores
• Maximum Size: Rs. Five Thousand Crores
• Initial Closing: On achieving Minimum Target Size
• Final Closing: 18 months after Initial Closing
• Fund Life: 10 years, extendable by upto 3 years
• IRR: Fund will target Gross Investment Internal Rate of Return of 10
per cent per annum before taxation and management charges

11. Why the Fund will succeed
• The right resources and competences
– World class telecom infrastructure, world class entrepreneurs, access to
world’s best technologies, world’s largest young talent pool & strong
government focus
– Entrepreneurial bug has bitten India – success of IT/Pharma has created role
models / icons, IIT / IIM grads choosing entrepreneurship over MNCs,
Entrepreneurship / Innovation Cells at leading universities, etc
• 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, approaches, GTM
– Awareness and understanding of BOP context – they come from tier 2 / 3
towns & rural areas too
• The right market
– World’s largest market for products / solutions for the poor
– Market explodes for the right offering at the right “Indian” price point

12. Fund Pipeline: Representative
Examples
• Narayana Hrudalaya
• Arvind Eyecare
• Jaipur Foot
• The Acumen Fund
• Aavishkaar
• Selco: rural electricity
• Mobile led financial inclusiveness – EKO, Mcheck,
• Rural ATMs - solar power, no AC, biometric authentication (e.g. by
Vortex Engineering)
• Rs 3000 fridge, battery run, sold by village girls (e.g. by Godrej)
• Rs. 700 Water purifier using paddy husk ash matrix (e.g. byTata
Chemicals)

13. End
National Innovation Council