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Intellecap Launches Research Publication on the Social Enterprise Landscape in India

Intellecap launched the research publication "On the Path to Sustainability and Scale: A Study of India's Social Enterprise Landscape" at the Sankalp Forum 2012 in Mumbai on 12th April, 2012. Click here to read and download the report.

"On the Path to Sustainability and Scale" provides insights on the for-profit social enterprise landscape in India. This report analyzes the state of these mission driven businesses including their geographic and sector distribution, business structure, stage of development, financial viability, funding sources and key challenges. This analysis and the actionable recommendations that follow will assist investors, donors, sector enablers, policy-makers and academics in making informed decisions about their involvement in the social enterprise industry.
 
This report shares findings from a survey of for-profit social enterprises (socents) operating in India across six sectors that directly impact the quality of life for individuals at the base of the economic pyramid (BoP): agriculture, education, energy, healthcare, livelihood development and water/sanitation.
 
Below we share the highlights of our findings.
 
India’s social enterprises are a young but ambitious industry. Nearly half of the enterprises have been operational for less than two years, yet their aspirations for growth are apparent in: 1) their overwhelming choice for the private limited company structure; 2) their aggressive pursuit of capital; and 3) their investments in building leadership teams early on in the enterprise's life cycle.
 
The industry has experienced dramatic growth over the last 5 years, with the greatest growth occurring in energy and agriculture. Health, livelihood development and water/sanitation have also witnessed growth during this time frame, and education has just taken off.
 
Socents are operating across all of India. While socents by and large choose to establish their headquarters in major urban centers in the South and Western regions, they are operating across the entire country, including in states with the highest levels of poverty. Nearly 60% operate in at least one low-income state.
 
The majority of socents are small, reflecting the industry’s youth but not it’s potential. Socents are growing, and a strong correlation exists between age and turnover, suggesting that these enterprises are focused on growth.Many – but by no means all – are achieving it over time, despite the notable obstacles they face along the way.
 
More than 1 out of 3 enterprises report being in a growth stage, but another 10% are stuck in a “steady state” in which they have not been able to move beyond their initial target markets after 5 years in operation. These enterprises report that the greatest challenge they face is raising capital.
 
India’s social enterprises are capital hungry businesses, with only 7% reporting that they do not need any form of external capital currently. While equity is in highest demand across all growth stages, there is also significant demand for grant funding and debt.
 
Soft funding from grant-makers, incubators, fellowships and competitions are a crucial source of capital for early-stage enterprises. Beyond friends and family and personal funds, early-stage enterprises appear to rely primarily on these sources of soft funding, particularly at the pilot phase.
 
Finding and retaining good talent, raising capital and building the value chain create the greatest barriers to sustainability and scale for social enterprises. Despite the sector's significant growth, these challenges continue to be significant obstacles for many socents. Raising capital is a greater challenge for enterprises in the pilot/design and steady-state phase, while hiring and retention is a pressing issue for across all stages and especially for growth-stage enterprises. Value chain challenges are most acute for pilot/design enterprises.
 
Nearly 50% of enterprises have training programs for employees to compensate for the limited talent pool. This proportion is surprisingly high given the industry's youth and the resources training requires. Yet retaining employees post training is a major challenge, reflected in the high attrition rates of lower-level employees.
 
Socents across the growth spectrum are unable to pay competitive salaries. Not surprisingly, early-stage socentscite low salaries as a key constraint to hiring and retention. Yet this challenge remains a persistent challenge across growth stages, rather than diminishing as it would for a traditional business.
 
The greatest financing challenge is not a limited supply of capital but rather socents’ limited access to it, either because they do not meet investor requirements concerning revenue, track record, profitability, or because their business model needs further refinement. Only steady-state enterprises tend to cite a limited supply of capital as a key challenge to securing it.
 
Despite the challenges, socents are making a major impact in India. Nearly 1/3 of them are operating in more than 100 localities, and nearly 1/3 are serving more than 50,000 beneficiaries annually. While still operating on a relatively small scale compared to successful growth-stage businesses in India, this coverage is significant given industry's youth and holds the potential for dramatic growth in the future as the industry matures.
 
Click here to read and download the report.
 
Notes For Editors: 
 
About Intellecap 
 
Intellecap is a pioneer in providing innovative business solutions that help build and scale profitable and sustainable enterprises dedicated to social and environmental change. The Company is uniquely positioned at the intersection of social and commercial business to attract and nurture intellectual capital that combines the business training of the commercial world with the passion and commitment of the social world. Intellecap's clients include a broad range of enterprises, investors, development finance institutions, foundations, and private sector corporations. 
 
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Dipika Prasad 
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