Money alone might improve extreme poverty; economic justice requires more. When Upaya looks for companies that create dignified jobs for the poor, we evaluate questions of reliability, safety, and fundamental respect in addition to the economic benefits.
Upaya Social Ventures is delighted to announce a new member of its management team. Shruti Goel joined in late January in the newly-designed role of Director, Impact Measurement & Management.
As part of its coverage of the Deshpande Foundation's Development Dialogue 2015 in Hubli, thealternative.in sat down with Upaya's Director, Business Development Sreejith Nedumpully to talk about his previous work with Rope International, what initially drew him to Upaya, and where he sees the future of livelihood development in India.
The interview has been reprinted below with the permission of thealternative.in, while the original article can be found here.
Sreejith Nedumpully
In his role as Director (Business Development) at Upaya Social Ventures, Sreejith Nedumpully is enjoying the opportunity to realise his long time passion—building regional eco-systems of small enterprises with big impacts. As the co-founder and former Managing Director of Rope International, a manufacturer and supplier of handmade and handloom woven natural products, Sreejith has had over two decades of expertise in the domain of rural livelihoods and the challenges of scaling small businesses.
At the 8th annual Development Dialogue 2015, organised by the Deshpande Foundation in Hubli, The Alternative spoke to Sreejith about his journey from working with rural artisans to funding impact creating enterprises and the role of small businesses in making big change.
You have been involved in rural livelihood generation for over a decade. What are some of the chief learnings that led you to co-found Rope International?
During my work with in microfinance with DHAN Foundation in 2002, I got first hand exposure to the enterprising nature of people in rural India and how access to finance – by generating livelihoods – is directly linked to increased rural incomes. Thus, creating opportunities for gainful employment of BOP populations, besides permitting access to finance, can also permit a regular income stream to support a better standard of living. It also became evident that raising rural incomes was key to ensuring the financial inclusion of BOP populations.
At that time, in the midst of the discussion about capturing BOP markets through appropriate technology and customised product design, I found myself siding with those who were looking at reversing this trend by facilitating rural to urban transactions. So, we started focusing on livelihood generation by tying up with companies to outsource a part of their production to rural areas by setting up manufacturing centres in villages, employing and skilling rural manpower especially women’s groups, and supplying raw material to them.
This enabled companies that wished to increase production but, due to lack of physical infrastructure from working at full capacity, were unable to employ more people on site. This outsourced manufacturing model built the capacities of rural people and absorbed them into year-round employment.
Did you see this this creating an entrepreneurial mindset among these people?
It definitely did lead to the development of leadership qualities and better negotiating skills among the women employed in these units. Microfinance activities in the village had already empowered SHG women economically to some extent, making them confident and adept at negotiating with bankers for favourable financial deals. Further, under the outsourced manufacturing model, each unit was put under the leadership of 2-3 women who were responsible for managing finances and operations and that really honed their leadership qualities. Witnessing this transformation fired my own entrepreneurial ambitions.
Rope provides global customers access to lifestyle products and home decor made by rural workers and artisans in India using natural fibres. Pic Courtesy – design21sdn.com
Was this then the beginning of Rope’s journey?
Yes, my initial idea was an extension of the outsourced manufacturing model – outsourcing both production and services to rural areas. With my idea incubated by IIT Madras, I was able to work on the upcoming rural BPO model while simultaneously building my own business plan for the rural manufacturing model.
In 2008, with seed funding from the IIT Madras incubator, we were able to launch Rope (now Rope International) with the aim of creating employment opportunities for rural artisans, many of whom were still employing age-old manufacturing techniques to create produce traditional designs. Many artisans had been left unemployed when demand for their crafts gradually disappeared.
We began Rope using a key account model – partnering with large brands like IKEA and Walmart with a large and steady demand for products with certain design specifications. By establishing rural manufacturing centres that met the supply requirements of these large clients, we were able to leverage the natural skill and traditional craft knowledge of the rural artisans, upskilling them in the process by introducing them to contemporary design ideas. The large volumes (sometimes 10 lakh pieces of a particular product) required by these brands helped us move beyond the level of handicrafts to a handmade production factory, with production flows, quality control mechanisms etc. all established within the village.
The work of Rope, initially centred around weaver clusters in Madurai began to expand to other districts Tamil Nadu, where we trained and employed a few hundred people. As we got buyers from India and overseas, the quantum of production too began to grow. That’s how Rope began to be successful.
What were some key lessons about scale that you learnt through Rope?
With Rope, the idea was to create rural employment opportunities at scale, providing alternative livelihoods to people formerly employed, often as bonded labour in the textile mills and firecracker product units in Tamil Nadu. Our model involved setting up a unit within the village which employs about 50-100 women and replicate those units in neighboring villages. So in two years, we had six such units, each directly employing 60-70 women.
Besides this, each unit also indirectly employed about 30-40 women from the village who would take work home, supply at their own convenience rather than contributing to core production. By 2010, we had established 6 such clusters of units. Besides production units, there was a central hubs that procured and supplied raw material as well as collected ready products from the units, they were places where quality care, packaging, and despatch took place. Thus, we managed to successfully create the best of village level production by shift a large part of the value chain to the rural areas.
Rope is now continuing to produce quality products in large volumes, creating rural livelihood opportunities, generating profit, and maintaining stable business with our key account customers.
Tamul Plates, an Assam based manufacturer of disposable palm leaf tableware is among Upaya’s portfolio companies. Pic Courtesy – dealcurry.com
In 2013, you shifted gears, moving to Upaya Social Ventures. What motivated this decision?
By 2013, Rope had achieved a degree of stability and production was going steady without the need for new marketing. I began getting restless, looking to create newer, more exciting growth models that weren’t dependent on scaling through the establishment and replication of manufacturing units. My own experience showed that Indian government laws were prohibitive, making it especially difficult to access capital, thereby limiting the scale that a manufacturing enterprise can achieve, especially in the case of handmade products.
I have always been interested in working with rural entrepreneurs, helping them develop their business ideas, shape their models, and scale. Upaya gave me the opportunity I was looking for.
Can you tell us about Upaya’s work with early stage rural entrepreneurs and the gap that it is trying to fill?
India is capital-starved country with a big gap in accessing early stage funding, even in the impact investing space, where investors look for proven, profitable business models,, and look to minimise risk with smaller investment sizes. The focus usually, in the investment space, is more on profit and less on impact.
Upaya Social Ventures’ LiftUp Project bridges this gap by providing early stage, for-profit entrepreneurs with seed financing and business development support to help them launch and scale their business. As the first institutional investor, Upaya puts in an equity investment of Rs. 20-30 lakhs in each of these enterprises with proven business models and a revenue of about Rs. 10-20 lakhs. Investments are structured over a 3-8 year timeline, during which an enterprise can scale, attract follow-up capital and become profitable. We handhold entrepreneurs for a 24-36 month period, providing them with technical assistance, financial management, and developing effective market strategies.
We also provide advisory support and help them understand their beneficiaries better with annual surveys profiling potential customers. Working with entrepreneurs to collect and analyse social data on employees to monitor their progress out of extreme poverty.
What kind of enterprises does Upaya support?
We specifically target entrepreneurs, rural and urban, with long-term vision and a strong business plan. Our main focus is on strong business models that create jobs for the poor, ensure a secure income source, and improve their quality of life. While scalability is important to us, it alone will not determine whether we invest in a company or not. We examine the geographical limitations of SMEs, market crowdedness, product relevance, and employment generation before investing in them. At present, Upaya is supporting 6 SMEs across 4 Indian states working in areas ranging from handcrafted paper to urban sanitation. The challenge is in finding and identifying good entrepreneurs in remote regions, often not exposed to networking platforms like conferences.
Upaya’s business incubation support to local providers of essential services enables large scale job creation for the urban poor. Pic Courtesy - Samagra Sanitation
How has Upaya gone about building an entrepreneurial eco-system for its portfolio companies?
Our focus right now is on supporting groups of ventures from a particular region, for example, in the north eastern states. This helps create a favourable eco-system that will attract other capital and service providers there, giving these entrepreneurs wider networks to tap into. For us, it is always more viable to enter a region where we can partner with other service providers.
MFIs, like MicroGraam, for example, which provide small entrepreneurial loans will help meet the SME’s working capital costs to fulfil existing demands, enabling them to use Upaya’s funds for further growth and expansion.
How does Upaya access finance to meet its capital requirements?
With early stage funding, we found that charity is relevant since donors are not looking for a quick exit from the venture, more patient with the capital deployed and reconciled with reaping lower returns (about 5-6%) than commercial and impact investors. So, Upaya, which is registered as a not-for-profit company in the US, raises philanthropic capital from family foundations and big donor agencies based in the US where interest in making recyclable capital deployments to sustainable and impactful social enterprises is on the rise.
What have been some of important learnings for you from this year’s Development Dialogue?
Given Upaya’s own focus on developing regional eco-systems that promote entrepreneurship, I find Deshpande Foundation’s regional hubs model very interesting. The sandbox model, by supporting budding entrepreneurs with access to capital, mentoring, etc., is creating an eco-system that can encourage the entrepreneurial spirit in the region. It is also enabling small enterprises to scale by inspiring and supporting replication in other places. It is important, while doing this, not to adopt a one-size-fits-all approach but to have business models that are customised to regional contexts, are specific to local needs, and that concentrate resources in smaller geographical areas. Thus, factoring scale into the model allows entrepreneurs to come on board irrespective of their size or reach, without scale serving as a barrier to entry.
While there are some models, like Akshaya Patra which have expanded across geographies, most enterprises are small and with application limited to the sandbox and being in the can be really beneficial to these small but profitable entrepreneurs working in niche areas who might not have pan-india scalability. The Hubli sandbox model, by providing support to these value creating enterprises has great relevance for the entrepreneurial needs of different parts of the country.
Upaya was profiled in the 12 December 2014 edition of the Seattle Times. In the article, Upaya co-founders Sachi Shenoy and Steve Schwartz talk about the organization's evolution, the challenges of the work, and how the Upaya model is changing lives.
Extreme poverty is an unavoidable reality in India. The first time I traveled in the country — as an inexperienced and idealistic 20-year-old backpacker — I was shocked by the families living on the street, the children begging for food, the old women breaking rocks on the side of the road.
I wondered what could be done to help these people — the poorest of the poor. Some travelers gave them money, others didn’t. One (loosely) quoted the Bible by saying “Sarah, the poor are always with us.”
Everyone seemed convinced that extreme poverty was an intractable problem beyond straightforward solutions.
But Sachi Shenoy disagrees. She says these “ultrapoor” just need jobs.
“In India we estimate that there are almost 400 million people living under the extreme poverty line. ... One of the root causes (is) unemployment and underemployment” explains Shenoy, executive director and a co-founder of Seattle-based nonprofit Upaya Social Ventures.
Upaya — which recently received a grant from The Seattle International Foundation, the foundation that funds this column — hopes to address that unemployment by investing in business ventures that have the potential to expand and employ those who otherwise have few, or no employment opportunities.
Shenoy says she was inspired to start Upaya while working for a microfinance organization in Delhi, India. Microfinance is a development approach that lends money to poor people, usually for small-business ventures. She says the microfinance approach tends to focus on the “midlevel poor” — people who made $2 to $4 a day — rather than the “ultrapoor” — those who make less than $1.25 a day.
“There was a cutoff for being too affluent and then there were people we would do surveys on and say, ‘These people are too poor; they’re too much of a credit risk,’ ” says Shenoy, describing the selection process for microfinance applicants. “That’s when my interest got piqued ... If we’re really trying to alleviate poverty, what do we do about the extreme poor?”
Her answer was Upaya, which focuses on entrepreneurs who have ideas with big business (and thus big employment) potential. They offer investment (not loans) with the hope of creating jobs for those often left behind by microfinance.
“You can think of us as the angel funders for small businesses in India,” says Shenoy, explaining that Upaya makes a point of working with entrepreneurs who may have trouble attracting traditional investors or securing bank loans. The investments (usually between $10,000 and $75,000) go to businesses from areas that have a large concentrations of “ultrapoor.”
The goal is to help grow promising businesses with capital as well as mentorship. In exchange, business owners promise to hire the poorest people in their region as jobs are created.
In the past three years, Upaya has invested in six businesses, ranging from a dairy collective to a company that makes “luxury paper” out of rhino and elephant dung, and an operation that turns fallen palm leaves into biodegradable plates. All told Upaya ventures now employ more than 1,100 people in jobs that pay, on average, between $2.25 and $4 a day.
It’s still a tiny paycheck for a tiny percentage of the millions living in desperate poverty. But it’s enough to move those few from that dangerous ultrapoor category to the more stable midlevel-poor group. At this level people can begin to secure housing, eat regularly, keep kids in school and even address chronic health problems — all developments that Shenoy says they’ve seen among workers employed by their Upaya ventures.
Creating stable, decent-pay jobs in some of India’s poorest (and often) rural communities is a difficult business. Shenoy says their first business (the dairy collective) endured religious unrest and droughts in the first year. It was an experience that taught them to think in “contingency plans” and to closely consult with entrepreneurs about specific needs (special accountants to help prevent corruption and bribery, for example).
But it’s worth it to reach those who might not otherwise be reached, says Steve Schwartz, a fellow co-founder of Upaya. For him, the mission boils down to one of simple belief.
“The best way to get someone out of extreme poverty,” says Schwartz, “is to pay them better than someone living in extreme poverty.”
Maybe the “ultrapoor” aren’t such an intractable problem after all.
Sarah Stuteville is a multimedia journalist and co-founder of The Seattle Globalist, www.seattleglobalist.com, a news site covering Seattle's international connections. Sarah Stuteville:sarah@seattleglobalist.com. Twitter @SeaStute
Upaya Social Ventures is honored to announce that it has received a 2014 Light a Fire award from Seattle Met magazine, and is the first ever recipient in the publication's “Acting Globally” category. The Light a Fire awards were created three years ago by the magazine as “a celebration of organizations and individuals who make Seattle – and the world – a better place,” according to the publishers.
Co-Founders Sachi Shenoy and Steve Schwartz accepted the award from the publishers at an event held at Canlis restaurant in Seattle on October 21.
“This is a really exciting opportunity to celebrate this new approach to poverty alleviation and economic development with the Seattle community that has supported Upaya since the very beginning,” said Schwartz.
“It is also a great chance to shine the spotlight where it really belongs – on the entrepreneurs who are building these remarkable businesses and the individuals who are receiving steady employment for the first time,” he said.
In addition to the award, Upaya is being profiled in the November issue of Seattle Met magazine. The magazine will be on newsstands starting October 25.
Special thanks to longtime supporter Tim Wade for nominating Upaya for this award!
Upaya's Executive Director Sachi Shenoy was recently named to the Puget Sound Business Journal's "40 Under 40" list, an honor that "spotlights the top business leaders under the age of 40 who excel in their industry and show dynamic leadership."
Below is a profile of Sachi written by PSBJ Staff Writer Steve Wilhelm for the feature, and subscribers can click the link at the bottom of the page to read an extended Q&A.
Sachita Shenoy was brought up by her parents thinking it’s important to open doors for those who have had fewer opportunities in life, especially back in India.
“Our dinner table conversations at home, my father and mother always talked about what can we do to help family members,” she remembered.
The way she created to do that, and at the same time expanded to a much-larger sense of family, is a lesson in individualistic self-creation.
Her Seattle-based Upaya Social Ventures is a unique mix — part venture capital firm, part global NGO — a nonprofit with a mission of creating good jobs for good people in India.
How many jobs?
Upaya’s six businesses now employ 1,200 people in India, and those businesses are rapidly growing, with a promise of hiring many more.
The idea is that while traditional microfinance usually backs tiny one-person enterprises, Upaya backs people with bigger ideas to create larger companies that will hire a lot more people. Now, one Upaya company makes plates out of leaves, another contract with silk weavers.
“Upaya is investing in and building what we’re calling small and growing businesses, and really growing them so they can create jobs at scale. …We’re not talking about a few jobs;we’re talking about 500, 1,000,” she said. “That’s the way to attack poverty, is to create a virtuous cycle of economic development.”
Now and executive director of Upaya, Shenoy had no way of knowing, earlier on, how her life would evolve.
One good thing was that her Indian-born father, a cardiologist, believe she could do anything she chose.
“I had always been raised with this notion of equality. Gender disparity never entered my mind,” Shenoy said. “I never felt I couldn’t do something because I was a woman and not a man.”
Early on, she thought that the route forward would be to earn a lot of money so she could give it away, so she took courses in economics and became one of the first women on the JP Morgan currency trading desk on Wall Street.
But then she started to think there was a better way, and returned to school to earn an MBA.
“If felt like rather than work in finance in Wall Street and make charitable donations, I wondered if I could make much more impact, be more of player than be a check writer.”
So she moved to India to work in the slums of Delhi on microfinance projects, which led to a job with Unitus, then a Redmond-based microfinance company. And so she moved to the Seattle area.
But when Unitus restructured in 2010, she lost her job but saw an opportunity. She and some partners took over some of the contracts and created a new structure, where her company would support larger enterprises, invest in them and help them navigate the early years of growth.
Click here to read an extended Q&A with Sachi (subscription required).
Upaya partner Tamul Plates and its CEO Arindam Dasgupta were featured in this month's edition of Entrepreneur magazine.
Upaya co-founder Steve Schwartz talks job creation for the ultra poor on Rainmakers.tv
The past few months have marked an exciting period in Upaya's evolution - our team has had the opportunity to share our story with some incredible groups, we have forged new partnerships to expand the breadth and depth of our work, and our partners have been acknowledged broadly for their successes.
Upaya's Executive Director Sachi Shenoy and Advisor Brian Arbogast share the story of the organization's evolution and introduce the idea of "Pioneer Capital" in NextBillion's "What's Next for Impact Investing" Series.
Upaya's Sachi Shenoy was asked to share her thoughts on the potential for change found at the intersection of entrepreneurship and philanthropy.
Click to read her thoughts on Indiaspora.org.
Upaya's Executive Director Sachi Shenoy presented on a panel titled “Measurement and Long-Run Impact: A Discussion with UChicago Social Entrepreneurs” at this year’s TiEcon Delhi 2012 event. Moderated by Chicago Booth Deputy Dean and Upaya Advisor Robert Gertner, the panel explored three different organizations' approaches to measuring outcomes and the implications that effective measurement can have on long-run impact.
The Indus Entrepreneurs (TiE) was founded in 1992 in Silicon Valley by a group of successful entrepreneurs, corporate executives, and senior professionals with roots in the Indus region. Hosted by the TiE Delhi-NCR chapter, TiEcon Delhi 2012 recognized entrepreneurship’s move into India’s mainstream and the powerful change it has brought globally. TiE currently has 13,000 members, including over 2,500 charter members in 61 chapters across 17 countries dedicated to fostering entrepreneurship globally through mentoring, networking, and education.
For more information about the event, please visit www.tiecon-delhi.org
Update
on 2012-10-30 19:03 by Upaya
More on the panel and the challenges of impact measurement:
9 October 2012
Upaya is proud to announce that it has joined with the Indian School of Business (ISB) for the fourth edition of iDiya, the ISB's National Social Venture Competition. Through the partnership Upaya staff will participate in the mentorship and judging phases of the competition. In addition, those iDiya entrants with strong potential to create jobs and improve the quality of life for the ultra poor will be simultaneously considered for participation in Upaya's LiftUP Project.
iDiya accepts entries from small groups of working professionals in India. Teams submit an executive summary of their business ideas and plans, which are evaluated by student evaluators, faculty, investors and social VCs, and social entrepreneurs. Submissions are evaluated on various parameters, including measurable social impact, criticality of the social need and sustainability of the enterprise.
For more information on iDiya, click
.
Update
on 2012-09-19 05:36 by Upaya
Excitement for this year's iDiya Challenge is building. Upaya's involvement in the ISB initiative has been cited in:
13 September 2012
13 September 2012
14 September 2012
Upaya Social Ventures is proud to announce its partnership with The Skees Family Foundation (SFF). The formalized relationship will provide the organization with the financial and creative support needed to develop jobs and improve the quality of life for the 1.4 billion living in the most extreme poverty.
An active supporter of Upaya since its incorporation, SFF has been instrumental in developing outreach messaging and materials, advocating on the organization's behalf, and providing funding critical for the launch of Samridhi's community dairy initiative. Now with this formal partnership, the Santa Cruz, CA-based family foundation has reinforced its commitment to Upaya's mission.
“Working closely with the Upaya team through their launch, we saw firsthand that they walk their talk of 'triple Ts': tenacity, transparency, and trust,” said SFF Founder and Director Suzanne Skees. “Convinced of the impact Upaya could have through training locally-led businesses and providing reliable employment for the ultra poor, we viewed this partnership as a chance to leverage a small grant to get two great organizations - Upaya and Samridhi - off the ground.”
Running through 2012, the funding provided by the Skees Family Foundation will allow Upaya to further its commitment to the Samridhi project. It also gives Upaya the resources to continue the search for the next wave of entrepreneurs creating new opportunities for the ultra poor.
"One of the the most daunting things for a new organization is generating interest in a cause that may not yet be part of the mainstream discussion," said Upaya Executive Director Sachi Shenoy. "To have an ally like SFF willing to back its time and expertise with a generous grant really shows a genuine belief in our work," she said.
Suzanne is also a regular contributor to the Huffington Post and The Council on Foundations Re:Philanthropy blog. For more information on her writing and the Skees Family Foundation, go to www.skees.org.
Upaya Social Ventures is a registered 501(c)(3) nonprofit organization.
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