How Can Social Enterprises Impact the BoP Segment

Date:   Tuesday , October 30, 2012

Lok Capital is a Gurgaon based venture capital firm. It focuses on high potential financial inclusion and broader inclusion enterprises like education, healthcare and livelihood serving the bottom of pyramid (BOP) segment.

Social enterprises that work towards inclusion of the BoP segment walk a tight rope between balancing their profitability to sustain themselves, and making an impact on the socially backward population. Entrepreneurs who work for inclusion of the BoP need to focus on delivering impact to the communities and segments they want to serve and rest will fall in place. As long as the value proposition of the service they are offering to their customers is clear and the stickiness (relationship with customers) is built into the business model, financial viability/profits will automatically follow. The whole social enterprise space is at its infancy, so opportunity to innovate is immense. There are many "low hanging fruits" in this sector, so the best thing which entrepreneurs can do, is to choose any and drive it with 200 percent execution focus.

Social entrepreneurs need to invest good time in articulating their idea. This is very important, because only then can they communicate to stakeholders (customers, investors, and others) what they stand for, with minimal mismatch in expectations.

The imperative to set up social enterprises impacting bottom of the pyramid population is felt now more than ever. Social enterprises are not just about financial inclusion anymore. It has moved to several other sectors. As investors, we at Lok Capital believe in giving a lift to social enterprises across sectors. Lok Capital II will be focusing on four key sectors - financial services, education, healthcare, and employment services. The common thread is "inclusion" i.e. services that are targeted towards low-income, base of the pyramid segments to drive inclusive economic growth in India.

One key aspect that will drive the successful delivery of BoP business models is technology. Most of them impact businesses, especially when they are serving the BoP as "customer", are trying to balance three things
a) Quality
b) Accessibility, and
c) Affordability

HaWe feel technology for impact businesses is as important for any other business, but becomes significantly more relevant from the accessibility and affordability aspect. How can we utilize technology for better reach and penetration (accessibility), and in a cost effective manner (affordability)?ving said that, right technology and application development will always need the right, minimum scale, which is the other struggle for most impact businesses. So within the life cycle of Services Company the time to invest in technology becomes important. In our experience, technology for most of these BoP services companies is always an enabler and not the key value proposition in itself. So the core product/service is the key and only then technology can further help establish its reach and delivery. Sometime people put too much focus on technology too soon.

We have carefully selected sectors where the "demand" for the services is well established and proven. Therefore, in theory, impact and financially viability can co-exist. Achieving both, social impact and financial viability is key to proving Lok's social VC model.