Village Capital, the Washington, DC-based early-stage venture capital firm, adopts a unique model to identify the ventures it will invest in. Rather than getting entrepreneurs to make a pitch before it for funding and then going through an elaborate due diligence process, Village Capital finds these entrepreneurs and trains them before investing in their ventures. It runs an accelerator programme for 10-12 entrepreneurs and uses a peer-selection method to decide the ventures it will invest seed capital in.
The seed capital is provided by the investment arm of Village Capital, VilCap Investments, based in San Francisco. Village Capital focusses on five sectors – agriculture, financial inclusion, education, health and renewable energy – for its investments. It invests out of a global $17.7-million fund in the US, Latin America, Africa, India and is looking to expand its footprint in Asia, according to Deepak Menon, Regional Manager – South Asia, Village Capital.
“For each sector, for the accelerator programmes, we select 10-15 entrepreneurs from a number of applications. A lot of due diligence goes into selecting the entrepreneurs who participate in the programme,” says Deepak. The entrepreneurs go through three workshops, each four days long, spread over three months. “This is essentially an investment readiness programme,” says Deepak.
Curriculum & mentoring
During the workshop, Village Capital works with the entrepreneurs on their business model, their plans to scale and their long-term impact vision through the lens of an investor. The capital raise programme is tied to what the entrepreneur plans to do with the funds. The workshop is a mix of curriculum and mentoring.
At the end of the third workshop, says Deepak, two things happen. One, the entrepreneurs would have met a lot of investors during the programme and would have had discussions on funding. Village Capital brings in a number of early-stage investors and facilitates pitch meetings with them for entrepreneurs. It is not a public pitch fest, but is organised in such a way that each entrepreneur gets to meet a couple of investors at a time. Entrepreneurs can pick the investors they would like to talk to.
The other outcome of these workshops, points out Deepak, is Village Capital’s own investment. “We do this through a peer selection methodology. The entrepreneurs rank each other on a set of variables that includes team, value proposition, vision and problem statement, product and market fit,” he says. The ranking is shared among the entrepreneurs, who talk about their strengths, concerns and share feedback. For the top two in this ranking process, Village Capital commits to providing seed capital, of about $50,000 and going up to, in some cases, $75,000.
“For us as a VC firm, the programme is our due diligence process. Our investment committee is the entire participating cohort. We believe that the peers know better than we do about the challenges the entrepreneurs face in this domain, what the problems are and what the potential to scale is,” explains Deepak.
Village Capital does not charge the entrepreneurs anything for participating in the workshop, but works with funding partners such as Michael & Susan Dell Foundation and Omidyar Network.
India investment
In India, Village Capital has invested in 14 ventures of which 11 are active. The companies include Sudiksha, which educates and empowers local women to run pre-schools; Experifun, which has developed a learning platform for teaching science in rural and urban schools; and, Under the Mango Tree, which teaches farmers to use beekeeping to boost crop yields and increase their income.
“Our thesis is to work with entrepreneurs who are solving real problems of access and affordability on the ground, and real problems of sustainability which is why renewable energy and agriculture are part of our sectoral mapping,” says Deepak.
(The article first appeared in The Hindu BusinessLine.)