Nagaraja Prakasam has a 'Back to Bharat' strategy for businesses

He settled in Bengaluru, joined the Indian Angel Network (IAN), and would go on to spearhead impact-focused activities at the group through IAN Impact. He also became a partner at New York-based Acumen Fund, a $100 million non-profit impact venture fund. He is also the co-founder of the Nativelead Foundation, which encourages entrepreneurship in non-metros of Tamil Nadu, and is at present the interim CEO of the investment arm of the Foundation called Native Action Network. His goal is to use his corporate knowledge and interest in social impact to help ventures imbibe the best of both worlds, which is, have the “efficiency of a corporate and the heart of an NGO”,” he says.

Prakasam has invested in 31 social enterprises since 2012, having fully or partially exited 11 of them. The average ticket size of his cheques is between Rs 2 lakh and a crore, with the investments structured as “50 percent debt and 50 percent equity”. This gives him a steady cash flow and has been his only source of income. The investor says he is “sector-agnostic”, which means his investments range across sectors like waste management, software as a service (SaaS), food and textile.

Prakasam’s last investment was in sustainable water management startup Boson Whitewater in February. The startup, as per media reports, raised a funding of Rs 3.45 crore from Prakasam and IAN. His next investment, unannounced at the time of this article being published, is in a startup that is using technology to help weavers. Prakasam says he likes to get deeply involved with every entrepreneur and fully understand the problems for which they are trying to find solutions, a practice he developed during his decade in the US.

While in the US, he was part of a charity organisation called Association for India’s Development (AID), which he credits to have opened his eyes to the social challenges in India, businesses that are solving for solutions, and how technology can be leveraged for impact. It was there that he took an oath that whenever he is in India, he would personally visit the projects he is supporting, no matter how remote or challenging the travel; a practice he continues till date. “I don’t believe in PowerPoint,” he says.

“Naga is the most widely-travelled impact investor out there. He’s probably seen most parts of the country being on the ground,” says Srikrishna Sridhar Murthy, co-founder and CEO of Sattva Consulting, one of the first social enterprises he supported in the early 2010s. Murthy says he has got calls from Prakasam from remote districts in Jharkhand and Chhatisgarh. “A lot of impact investors give advice from their comfort zone, but Naga is different. He is on the field with entrepreneurs and communities. I’ve seen him do this for so many years and it has given him a deep knowledge of the grassroots.”

Infosys co-founder Kris Gopalakrishnan, who is also a member of the IAN and shares a few common impact investments with Prakasam, agrees that the latter is extremely well-travelled and “focusses on building the ecosystem around the regions in which he invests, more than many people I know,” Gopalakrishnan says.

The two often exchange notes on investments, given that a common area of interest is to work with entrepreneurs in Tier-II, III cities. Building an ecosystem in remote regions often involves developing local investors, local business leaderships, working with people to find vendors for the startups, and many other interventions. This necessitates continuous support from investors like Prakasam. “I subscribe to Naga’s view that as India transitions to a developed economy, we need to make sure that we have development across India and not just cities, and we need to support entrepreneurship across India, broaden the ecosystem to be more inclusive,” Gopalakrishnan says.

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“The ignored billion”

Prakasam’s interest in travelling to different places within India was fanned by a habit of reading books about India that he developed early on in childhood. He grew up in the small town of Manamadurai in Tamil Nadu. It was a beautiful town, he says, where he used to walk to school, crossing the Vaigai River along the way. His mother had studied till class 10, but knew the importance of education, and read a lot of books. This encouraged young Prakasam, then in the fifth grade, to pick up some of these books and try to read them, all by himself. He grew up reading books about Indian history and heritage and counts Tamil writers Sandilyan and Kalki Krisnamurthy among his favourites.

Reading about different places made him want to travel there, a wish he fulfilled travelling to the most remote places of the country as an investor. His meetings with various kinds of people during these travels—from matrilineal tribes in Meghalaya to an engineer in Kerala whose innovation, a coconut tree climbing machine, was helping increase farmer income and productivity—form the crux of his learnings that Prakasam has now published in a book called Back to Bharat: In Search of a Sustainable Future.

The investor recollects how Shamil Salam, the aforementioned engineer from Kerala in Kozhikode, took him to Kappad, the place where Portuguese navigator Vasco da Gama first landed in 1498 during his search for India. “I wondered ‘what would have been there, in the same spot, over a 100 years ago. No commotion, no internet, but somebody had risked their life travelling thousands of miles into an unchartered territory, looking for a place called India, which seemed to be doing better in the world,” says Prakasam. “I realised there was a time when India contributed almost 25 percent of the world’s gross domestic product (GDP), and it made me think, could that country of the past have solutions to our current problems of inequality and climate change?”

It is here that in his book, Prakasam makes a distinction between India and the place he calls ‘Bharat’. In India, he says, there are 250-300-odd million people with different levels of privilege, and access to resources and services. ‘Bharat’, for him, represents the “ignored billion” in the country; venture investors are mostly wary of them, and businesses stay away as they do not see profit in solving for them. “Most brilliant minds in the country are attracted towards solving India’s problems, less and less are attracted towards solving ‘Bharat’s’ problems,” he says, explaining why turning to ‘Bharat’, and leveraging its strengths to solve critical challenges has formed the core of his investment thesis.

This prompts him to take the lead with betting on startups when others are hesitant. One such example is AI-native enterprise SaaS unicorn Uniphore, which according to a January 2023 report in Inc42, turned profitable in FY22, with operating revenue jumping over 9 times to Rs 743.6 crore. The profits were at Rs 33.4 crore against a loss of Rs 282 crore in FY21. Prakasam was one of the earliest investors in the startup.

Ravi Saraogi, co-founder, Uniphore, recollects the time in 2014 when the startup was developing voice-based technologies across multiple Indian languages to “bridge the gap of information delivery and enabling people to use their mobile devices to access and deliver information”. They were working towards an angel investment round to navigate the business towards the SaaS area, when Prakasam led the efforts from the Indian Angel Network to enable the first investments into the company.

“What we are today has a lot to do with the role Naga played as a mentor, board member, investor back in 2014-15,” Saraogi says. “When we were struggling with our angel round, it was Naga who showed faith in us and believed in our story, and that led us to pivot the business. What Uniphore is today goes back to that moment when he decided to invest.” The founder adds that going forward, Prakasam helped in future funding rounds with his connects, and by sharing his view with other investors. He also helped them navigate an international expansion, starting with Singapore. Today, Uniphore has over 900 employees serving over 1,500 enterprises in more than 20 countries, Saraogi says.

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Patient Capital

As an investor, Prakasam wants to ensure that the companies he supports pass the benefits on to every last employee across the value chain. An example is Saahas Zero Waste, which started as a non-profit in 2001, but pivoted to be a social enterprise in 2010, and is now providing services in over 20 states in India. They have 300 employees, out of which 200 people are from the field team.

“Naga is always concerned that whatever profit we earn, we should pass it on to every employee on the field. Even if we have thin margins, we should pass on the benefits to those on the field,” says Wilma Rodrigues, founder and CEO, adding that he doesn’t simply take the word of the founder on the numbers, but takes the effort to validate them with spontaneous field visits. “Most investors just rely on the reports they get from companies, and their field visits are also pre-planned, with advance notices to the companies and all that. The spontaneity that Naga has is missing with most investors.”

According to her, more investors in the impact space should speak Naga’s language, because running an SME in the impact space is extremely challenging. It not only requires a long gestation period, but the return on investments cannot be at the same level as a mainstream business. Saahas, for instance, recorded a revenue of Rs 80 crore in FY23, double from the Rs 40-odd crore in FY22, and posted a two percent net profit. They have the goal to reach Rs 150 crore in revenue over the next three-five years, and process about 500 tonnes of waste every day.

But these numbers are more than a decade after Rodrigues and her team first started the venture. “We are battling problems at the ecosystem-level, and impact investing is patient capital, for which we need far more time than the average runway of five-six years for returns,” she says. “Many impact investors are not aligned to that mode at all, so having somebody like Naga speak on behalf of enterprises like ours is very important.”

Murthy of Sattva observes that India’s development sector is changing, with more money coming in from investors, philanthropy and corporate social responsibility (CSR) funds, which is also attracting more talent. “We need people with a wealth of knowledge to understand and connect both worlds. Naga is one of them. He has a bottom-up thinking and knows how to connect it with a top-down thinking.”

If India has to be a $5 trillion economy, we need to make sure that it is benefitting the bulk of our people and not just a few, Rodrigues says. Saraogi of Uniphore agrees. “Countries focus on GDP, but the actual change happens when PPP (purchasing power parity) improves and it is people like Naga who are helping on the ground to improve the PPP of the country.”

Prakasam, who calls himself a farmer, says that while people usually start thinking about social impact and giving away money after retirement in their sixties, he did not want to lose the time in hand. It did require making lifestyle changes and cutting down on luxury or recreational expenses, but both he and his family were on board. “Be it running a company or living my life, I never believed in blowing away money. You do not need much money to live a good, simple life in India. And that helped me retire at 41,” he says. “The choice is always ours.”