Venture capital firm Capria aims to establish five to seven impact investment funds in Southeast Asia by 2021. Capria, which will partner local fund managers, envisages separate investment strategy and sectoral focus for these impact vehicles. The firm currently works with nine fund managers and the Capria Fund, a $100 million, a multi-manager vehicle, will make anchor LP investments in up to 15 impact funds. In addition, fund managers will be supported by the Capria Network, an invite-only network of global impact fund managers and investors.
In an email exchange with DEALSTREETASIA, Will Poole, Managing Director and co-founder of Capria, explains: “We focus on funds addressing the global “missing middle“, which generally refers to initial ticket sizes from $500,000 to $2 million, which is too small for banking and later-stage VC or private equity, and too big for angel investing. The lifespan of most funds in the Capria Network is 10 years.” Capria seeks to finance local entrepreneurs in high-growth emerging markets in Africa, Latin America and Asia in areas such as agriculture, food security, healthcare and education.
LPs & exit strategies
When reviewing the contours of an LP-GP relationship in an impact investment funds, Poole explains: “Impact investing LP/GP relationships are not dissimilar to others, beyond that we [LPs] look for profits AND demonstrated positive social impact and modest reporting on the same.” Institutional funds that are LPs of Capria include the International Finance Corporation (IFC) of the World Bank Group, UKAid and Pfizer, while some foundations that are also LPs are the Sorenson Impact Fund, the Crystal Springs Foundation, the Lemelson Foundation and others. They are also LPs of its direct investing fund in India, the Unitus Ventures (formerly Unitus Seed Fund).
Poole notes: “The majority by number are HNIs who care about both – market rate returns and social impact. From a dollar volume perspective, we have institutional and family foundation investors who still care about attractive financial returns, but have more defined criteria of social impact they look to be delivered alongside the returns.”
In addressing the “missing middle”, LPs and funds are intent on nurturing commercially viable and sustainable enterprises with appropriate financing mechanisms while ensuring social, environmental and financial returns on investment. He adds, “The exit strategy for investors in any form of small and growing business in emerging markets can be challenging. For this reason, we invest in traditional VC funds in markets where there are proven exit paths, and in “SME” funds using quasi-equity, self-liquidating instruments in markets without good exit opportunities. Some funds do both.”
Southeast Asia focus
In terms of the geographic focus of the funds, Poole tells this portal: “Whichever countries have the best fund managers! We think those will come from India, Indonesia, Philippines for a start. Vietnam is also a possibility, as are Pakistan, Bangladesh, and Myanmar. And we’ll see some from Singapore who possess a more regional focus.”
The average ticket size of investments into impact funds will see Capria invest up to $500,000 per general partner (GP). Poole says, “When we take anchor LP positions in the future, we expect to invest $3-7 million per fund, depending on fund size and GP maturity.” According to Poole, key insight learnt from raising and managing the Unitus Ventures (formerly Unitus Seed Fund) that Capria plans to apply in the Southeast Asian context is that exits are hard. He highlights: “Exits are hard. Be realistic about where you will find them, and build deal structures to ensure you can get them.”