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Menterra Co-Founder, Mukesh Sharma explains the nuances of Impact Investing in India

GGI Business Review is a new business series, capturing snapshots of the GGI Harvard Case Style Masterclass by CEOs and Industry Leaders.

This particular piece is a snapshot from Mukesh Sharma's GGI Masterclass.


Today everyone talks about making an impact! But what do they mean when they say they want to make an impact? If a person says he wants to make an impact, it can mean multiple things. He could be talking about making an impact in his own life or someone else’s life. When an entrepreneur talks about making an impact it can also have multiple meanings.

Similarly, when an investor talks about making an impact then what are the different ways he can make an impact? Well, the best way for an investor to make an impact is by investing in an organization that is making an impact on the lives of people by solving their problems and helping them lead a better life.

Now, this can be done in two ways, either the organization operates as a non-profit and solves various problems faced by people on different levels. The other way is when a business is solving similar problems for the people but is able to generate revenue and profits while doing so. Investing in such a business would term the investor an “Impact Investor” as they are directly funding a business that is making an impact in the community.

Mukesh Sharma, the managing director of Menterra, a leading VC Fund in the impact investing space takes us further ahead on the journey of understanding Impact Investing as an industry in India.


The biggest question that comes up when we talk about Impact Investing, is that “Is impact Investing really needed?” What gives rise to this question is the fact that like any other Venture Capital (VC) Fund, impact investing companies also invest in various businesses and generate profits while doing so as well. But, the difference is that a normal VC Fund does not pay heed to the societal or the environmental impact being made by the businesses in which they are investing, because their primary aim is to invest in businesses that can give them returns over a period of time.

Impact Investing Firms on the other hand look to invest in businesses that are delivering impact in the community and also possess the ability to provide returns on the capital invested over a period of time.

The following reasons point out why Impact Investing is really needed:

1. Markets are inefficient Economics for typical VC funds says that markets are efficient in the long term, however, in actuality, the markets are always focused on the increase in profits and not on sustainability.

2. Lack of Government Funding The government does not have enough funds to address the basic needs (primarily because its resources are tied up elsewhere in investments like military up-gradation). Moreover, if we look at the large areas of where the government’s money is going, it's not easy to change it much, whatever regime comes into power.

3. Insufficient Philanthropic capital Philanthropic capital is not sufficient for the country's needs. Additionally, the country’s needs are growing rapidly on a daily basis.

4. Utilisation of the available funds Trillions of dollars are invested in public markets, and even a small contribution from this enormous capital towards impact investing can help solve many problems faced by communities around the world and set us in the right direction.


  1. The basic needs of many large sectors are not met.

  2. There is a large and underserved market in India that can be uncovered for many great opportunities.

  3. There is an enormous talent pool in India. Many people around the country are looking to solve various problems through their creative solutions.

  4. The quality of entrepreneurs is increasing rapidly. Furthermore, a lot of professionals are transitioning from their corporate roles to solve various problems around the country.

  5. India is a rapidly growing market and has strong financial markets and good resources, so increasingly, the capital coming into the country is looking for market-based models and sustainability of the businesses.


Now that we know the need for impact investing and its opportunity as a sector in India, how do we identify the businesses which are making an impact? The following attributes help in the identification of an impact-making business:

  1. Impact intentionality The business’s primary intention should be to make an impact and rather than generate returns

  2. Financial returns If there are no financial returns then it's a non-profit organization. Where we’re able to generate returns on the capital that is employed, then we get into a business or for-profit sector. So, financial returns are also important for impact investing.

  3. Measurements We should always measure the impact that we are generating to ensure we’re on the right path and not deviating from the primary goal of making an impact in the community.


Impact washing means we are saying that we're an impact investor without caring about the impact that our investments are actually making and without actively targeting and managing for positive impact. We may generate good data and reports around the investments but in actuality, we are making decisions that don't necessarily make an impact on the community.

Impact deviation means where we start with the objective of making an impact but over time, the move of making more profits takes over and the sustainability of the business is impacted. When we deviate from impact to profits, it creates an integrity risk for all the stakeholders involved in the business


After identifying the correct businesses to invest in, the next step is dealing with the Valley of Death. The Valley of Death refers to the stage in the lifecycle of a startup where it has just begun its operations and is not generating significant revenue or profits needed for survival over a period of time.

Even if the business is able to generate revenue, it doesn’t ensure its survival. Many businesses are generating huge revenues, but also incurring losses at the same time.

So, the longer a business takes to generate profits, the longer is the death valley curve for that business, and the higher is the fatality rate.

Crossing the death valley curve= the point of profitable growth

Focusing on revenue is not enough, a business must also look at profitability and growth. In order to do this, we need high customer/market orientation, sharp underwriting, good organizational design, impeccable execution, and financial discipline from the business.


In India it can become difficult for impact investing funds to use the Conventional VC model used in the Silicon Valley (2 and 20 model) to operate their business in the country, primarily because a Conventional VC Model operates in a way that :

Focuses on going for the home runs, i.e., businesses that promise huge returns over a period of time. Such firms operate in a way that maximizes the probability of a home run for them. Moreover, these firms double down on winners and infuse more capital into them.

Such a model is not feasible for India over the long term even though many firms are using this model in India, as even if the business raises Series A funding, it might not get further funding.


Now that we know that it can be difficult to replicate the conventional VC model in India, we need to work in order to create and successfully reinvent the investment model for India. It can be done in the following way:

  1. Going after sectors which nobody has approached till now in order to gain the first mover advantage.

  2. If we are starting with a smaller fund then it can be difficult to sustain in the market, so it becomes essential to constantly demonstrate your return-making ability to grow in the market.

  3. Look out for successful funds and their investors and try and adopt their best policies.

With the growing environmental and social awareness in the community, the future of Impact Investing looks promising. So companies should capitalize on this growing interest and make their moves to gain significant returns while making an impact in the community.


Mukesh is a co-founder of Menterra, an investment fund platform. Over the last 18 years, Mukesh has invested in and worked on deals in several emerging and frontier markets. Earlier, he was the Chief Investment Officer at Villgro, has been a non-executive director on the board of several companies, and has advised the promoters and board of companies.


If you are interested in learning about GGI's MBA Scholar program, you can learn here.

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1 Comment

Very precisely written, thank you for enlightening about Impact Investing. Encouraging to know investors are focusing in this area.

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