Upaya Social Ventures

About

Upaya Social Ventures was founded in 2011 on the premise that creating sustainable, dignified jobs for those in the poorest communities can lift millions out of extreme poverty while supporting the transition to a green economy. To help create these jobs, Upaya invests in early-stage entrepreneurs dedicated to employing at least 50% of their workforce from local communities living in extreme poverty, where fair-wage jobs with predictable income are needed most. These “missing middle” organisations tend to be too small to be targeted by commercial banks, venture capital, and other investors, and too large for microfinance institutions.

Upaya began by investing in four small businesses in rural India which created nearly a thousand jobs within three years. Today, Upaya’s investments span 12 Indian states, with nearly half of their $1.13m invested in underserved states, and numerous sectors that include agriculture, handicrafts, and waste management.

Upaya supports its investee companies through a blend of capital provision (seed funding) and capacity building – both vital in helping entrepreneurs boost their ability to scale. More recently, Upaya has made investments through their pioneering concept of ‘recycling philanthropy’, which draws together philanthropic funds to create a pool of recoverable grants from which investments are made. Financial returns from these investments are returned back to the original donor with a capped premium of up to 5%.

Type of actor

Non-profit impact investor

Investment type

Seed funding (equity and debt)

Operates from

Bangalore, Seattle

Sectors

Rural manufacturing / Agriculture / Skills development and employability / Textiles, apparel and handicrafts / Waste management and sanitation

“Two particular strategies stand out: the organisation’s focus on leading with sustainable, dignified jobs as a core part of their impact thesis, and their innovative funding approach centred on recoverable grants.”

Approach

Leading with a focus on dignified jobs generates impacts well beyond labour and employment. It supports families’ and communities’ financial stability and climate resilience, while creating opportunities for the most vulnerable, including women living in poverty, struck by both gender and economic discrimination.

Climate change’s disproportionate impacts on those living in extreme poverty, and the increasing need for climate adaptation and mitigation in sectors like agriculture, will be central to Upaya’s investment strategy going forward. Upaya follows the ABC framework (Avoid harm, Benefit stakeholders, Contribute to solutions) to screen companies at the pipeline stage, especially with regards to their relation with climate mitigation and/or adaptation work.

Recognising the unique and impactful solutions that women entrepreneurs in their communities are bringing, as well as the historical lack of investment going to women-owned businesses in India, Upaya has also increasingly incorporated a gender lens in their investment approach. Companies employing more than 30% women jobholders are scored higher during the pipeline assessment stage and are hence more likely to receive investment. In 2018, Upaya made a commitment to balance out the proportion of investment going to women-owned businesses in their portfolio, and to find and invest in more businesses focused on employing women. More recently, they have pledged to collect genderdisaggregated data as part of their impact analysis, exploring the unique impacts of their investee companies’ jobs on women and their families in an effort to make recommendations for these companies and their industries.

Impact

In its first decade, Upaya’s portfolio has created more than 27,000 sustainable, dignified jobs for families in India’s marginalised communities. Through regular surveys, jobholders at portfolio companies report an average income increase of 81%. Fifty-eight percent of companies accelerated by Upaya through its specialised accelerator programme in the last three years are led by women, and nearly half of them are engaged in climate mitigation and/or adaptation work. Upaya’s central commitment to dignified jobs for the poor has led to a number of investments in early-stage social enterprises that employ and train women in green alternatives to traditional agricultural or artisan work. For example, two of Upaya’s portfolio companies, Greenwear and Resham Sutra, train the women they employ in solar-powered looms and other sewing machines for creating zero-emissions artisan products.

Upaya also tracks how well their investee companies are doing in terms of revenue, market value, and ability to attract more capital after their support a particularly important metric, given that Upaya is the first institutional investor for more than half of the companies in their portfolio. Following Upaya’s investment, these companies, on average, raise 10X in follow-on funding from other investors, reach revenue levels 26 times the amount of Upaya’s initial investment, and grow their valuations by 6 times compared to their valuation at the time of the Upaya investment.

Key takeaways

Investors and international development professionals alike have much to learn from Upaya’s approach. Two particular strategies stand out: the organisation’s focus on leading with sustainable, dignified jobs as a core part of their impact thesis, and their innovative funding approach centred on recoverable grants. This form of ‘recycled philanthropy’ is still in its infancy across the global investment community, but Upaya has proven its financial and non-financial benefits for investors, investee companies, and the vulnerable communities that they serve.

What’s next?

Beyond continuing to strengthen their gender and climate justice strategy, Upaya is currently raising their second pool of recoverable grants. The $3m pool will expand the opportunity for philanthropists to recycle their grants while making a powerful impact on the ground, as Upaya seeks to create 50,000 new jobs through 12 to 16 new investments in the next three years. These recoverable grants will be repayable to the donors based on overall portfolio performance, up to a return of 5% above the original amount.

Other exciting upcoming initiatives for Upaya include the launch of their Dignified Jobs Index and associated learning lab to build capacities of investors and entrepreneurs in the Global South to invest in dignified jobs for the poor; a new mentorship program that will provide portfolio companies with direct consulting and support; and an ambitious goal to raise investment capital from India.