Goodwell InvestmentsBuilding scalable businesses for the majority

Lessons learned in responsible venture capital/private equity investing in IndiaPresentation for TBLI, 10 November 2011

© Goodwell Investments BV, 2011

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Contents

1. Introduction Goodwell Investments2. Microfinance investments in India3. Lessons learned

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“ There is an idea that values are divided between the financial and the societal, but this is a fundamentally wrong way to view how we create value. Value is whole. The world is not divided into corporate bad guys and social heroes.”

Jed Emerson, blendedvalue.org

Introduction Goodwell

• Goodwell Investments is an impact investment firm. Our vision: substantial simultaneous social and financial valueMission: to build finance channels that support the growth of businesses that have substantial impact. The first sector of focus is microfinance equity funds.

• Approach:– Equity funds to fuel growth of sector, early stage – In-country partners & handholding, high touch– Attract funding from high net worth individuals, family

offices, institutions and development finance institutions

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Goodwell team

• Wim van der Beek, founding partnerInvestment professional, active in microfinance since 2004. Focus on India. Former partner PwC and co-founder of investment consultancy.

• Els Boerhof, partner Investment professional, active in microfinance since 1993. Focus on

Africa. Former manager MASSIF fund at FMO, and international trade & commodity financing with MeesPierson.

• Bernadette Blom, partnerFounder of Corporate Connect, a financial advisory boutique. Specialist in deal structuring, fund structuring and fundraising. Previously with Accenture, Bank of Tokio, Mitshubishi and ABN Amro.

• Bob Assenberg, partnerInvestment professional, active in microfinance since 1993. Former manager Triodos funds in renewable energy and microfinance. Previously with Procredit and FMO.

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Goodwell team

• Vineet Rai, partner India Social entrepreneur, founder and CEO Aavishkaar Micro Venture

Capital Fund and co-founder Intellecap, leading consultancy in microfinance.

• ‘Tokunboh Ishmael, partner NigeriaPartner in Alithea Capital. Background in investment banking, private equity investing, technology and new business development in US, Europe and Africa, i.a. with Aureos Capital. Board member AVCA.

• Patricia Safo, partner GhanaFounder JCS Investments. Experience in managing Ghana’s first SME VC fund. Entrepreneur, e.g. in fish farming and fresh foods exports. Background in small business development.

• P Pradeep, CIO IndiaSince start in 2002 involved with Aavishkaar Micro Venture Capital Fund. MBA, experience with operations, investments, project finance and venture capital.

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Goodwell’s current investors

USD 68 mln commited capital under management from:

• Development finance institutions (FMO, IFC, KfW)

• Pension funds (fiduciary managers: ING, Lombard Odier, MN services)

• Fund of funds (e.g. Paerel)

• Microfinance funds (Blue Orchard, Dutch Microfund, Co-Fund, NMI)

• Banks (Deutsche Bank)

• Foundations (e.g. Noaber)

• Private investors

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Impact investing: PE and VC

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The trend towards impact investing

“Reducing the problem”

Socially Responsible Investing- Negative screening- Positive screening

ESG focus and engagement

“Part of the solution”

Impact investing:Actively directing investmenttowards businesses that have positive environmental and/or social impact

The context: ‘the Base of the Pyramid’

• The Base of the Pyramid is often defined as the 4 billion people with annual per capita income based on purchasing power parity in U.S. dollars less than $1,500.

• According to some experts, the Base of the Pyramid is an untapped market opportunity of $13 trillion in annual sales as well as significant invisible assets.

Investing in the Base of the Pyramid

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Potential at a large scale• > 350 mnl people below international

poverty line, ~ 140 mln low income households

• Total estimated microfinance demand of USD 55 billion.

• Currently the outreach is at ~20 million low income households; i.e.: <14% penetration in MFI clientele.

• Total outstanding MF loan portfolio of top 250 MFIs is $2.4bn as of Mar’09. Low concentration of MFIs in poorest areas

• MFIs in India may reach between 30 to 60 million families by 2013. (sources: Intellecap: Inverting the pyramid 2008 and Sa-Dhan, 2009)

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Percentage of People Living in Poverty by

State

Legend

MFI Concentration

Goodwell geography: India

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Investments in high growth and emerging MFIsMFI receives:• Growth capital

– $ 500K to $ 5 million – 5% to 50% of shares

• Active support– Strategic– Capital structuring– Governance– Efficiency, HR– MIS and technology

Investment strategy

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An example of a local investment team: Aavishkaar

• Aavishkaar India Micro Venture Capital Fund (AIMVCF) is an SME fund, managed

in India with a strong record of investing in commercially viable enterprises that

have social impact.

• AIMVCF was formed in 2001 and closed in January 2009 after raising USD 14

million. Aavishkaar is currently raising USD 100 million for its new fund.

• Aavishkaar’s investments span a wide number of sectors such as ‘technology for

development’, ‘handicrafts’, ‘renewable energy’, ‘agriculture’, ‘rural innovations’,

‘health and education’.

Co-managed with local teams

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Impact Management Framework

Screening Engagement Active

involvement

Goodwell level Selecting partners with shared vision

Responsible investment principles

Sector initiatives (SROs, credit bureaus)

MFI level Selecting MFIs with dual mission

S&E management systems

Gouvernance, capacity building programs

Client level Exclusion lists Client protection principles

Credit-plus, BDS, market linkages, education and health programs

Lessons learned

Positive Value Driver

Risk Factors Driving Value Down

Start-up Stage

• Business model• Entrepreneur

track record• Geographical

location• Partnerships

• Operational• Market• Entrepreneurial • Financial• Technical

Growth Stage• Business

growth• Growth trends• Corporate

Governance• Credibility• Transparency• Risk

Management

• Legal and regulatory risks

• Growth risks• Management

risks

Mature Stage

• Exit potential value

• Future growth potential

• Leadership• Institutional

maturity

• Market driven risks

• Political risks• Sector

weakness

Internal External

Contact

Goodwell Investments BV Wim van der Beek: +31. 6 46 080801Sumatralaan 45 wim@goodwell.nlMediacentrum1217 GP HilversumThe NetherlandsTel. +31 35 7200111

www.goodwell.nl

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