Venture philanthropy only really made its debut in Asia three years ago, but the movement has been making waves of its own in the private equity industry there.
Over 13 years, Ashish Dhawan built India-based ChrysCapital into one of Asia’s top GPs, with $2.25 billion under management across six funds and a strong record of returning capital to investors, having averaged five exits per year since 2002 – a feat probably unmatched by any other Indian fund manager.
But last year, Dhawan left all that to devote more time to Central Square Foundation, an Indian educational development charity he’d founded. This might seem like an abrupt change; but in Dhawan’s mind, his private equity experience is exactly what his philanthropic venture needs.
“We’re supporting a social cause, but I hold [these organisations] accountable with the same standards as I expect in private equity,” Dhawan tells Private Equity International.
I hold [these organisations] accountable with the same standards as I expect in private equity
Improving metrics is a big part of this. For example, he always sets up measurable goals – such as student learning measured by test results – and holds quarterly to monthly meetings with the organisations to discuss how they are coming along.
For venture philanthropy to take off in Asia, Dhawan thinks that private equity needs to see more non-profits using the same skills the industry uses.
That is one of the goals of the Asian Venture Philanthropy Network, a not-for-profit dedicated to promoting the model in Asia. It was only founded in 2011, but it already has over 120 members from 19 different countries, including firms like CVC Asia Pacific and Baring Private Equity.
Its website showcases 14 Asian venture philanthropy investments – including Driptech, a company focused on providing more efficient irrigation to poor farmers.
Its backer LGT Venture Philanthropy estimates that 600 million small farmers cannot afford modern drip irrigation technology in order to save water, and thus easily waste water and cannot produce crops in the dry season.
Thanks to the $250,000 investment from LGT, though, Driptech was able to break into India and China, and now reaches 5,000 small-drip plots worldwide. Farmers can fully pay back Driptech for its technology within an average of six months, according to the firm, while Driptech’s financial stability and profitability had already exceeded LGT’s targets by 2011.
To date, there have been no exits of Asian venture philanthropy investments – which makes it hard for managers to demonstrate a track record. One global venture philanthropy GP says that given their profitability and growth trajectories, Asian investments look set to generate the same returns as anywhere else. But that won’t really be clear until there have been a few exits.
In India specifically, Dhawan plans to face the hurdles to venture philanthropy head-on. On the donor side especially, he spends a lot of time building relationships with wealthy families and “showing them why [venture philanthropy] makes sense”. Having them meet with the entrepreneurs and see tangible results serves as a great “proof of concept”, he says.
“I think private equity guys get frustrated [with philanthropy] because they’re just throwing their money at these causes and they don’t see scale,” Dhawan explains. “Private equity wants to solve big problems, and think top-down.”
In the world of venture philanthropy – and particularly in Asia – there’s certainly no shortage of big problems to solve.