Author: Pranav Bafna
Venture-backed businesses have wide ranging social and environmental implications. Managing it at an early stage has several benefits for startups. It opens doors to a pool of large-sized institutional capital, extending far beyond angel investors and family offices. It facilitates timely management of several non-financial risks and reinforces an environmental and socially sensitive value system during the formative years of a business itself.
At the early stage, disruptive technologies are exposed to critical social risks not known to traditional businesses. For instance, privacy violations and inherently discriminative algorithms pose a significant business continuity threat during the early stages of a business. On the environment front, new-age frontier technologies must source strategic and scarcely available metal resources including Lithium, Cobalt and Nickel. Demand for these resources is expected to increase manifold times against supply. Consequently, its non-availability or sudden price surges could pose an existential threat to disruptive technology businesses.
Demand for sustainability is overarching across the ‘Triple Bottom Line’ – People, Planet and Profit. This expectation was set forth by global institutional investors who were at the top of the investment food chain. The journey started with publicly listed companies and continues to spread far and wide. ESG (Environment, Social & Governance) compliance has become mainstream across Private Equity investors, and it is a question of when rather than if that ESG compliance becomes sin qua non for venture capital-backed businesses.
New-age businesses demand a significantly larger and riskier pool of capital. Angel investors and family offices who have an appetite for the same are far and few. This continuing trend will leave capital intensive startups with fewer options or alas, no option. Should startups desire to attract capital of a certain quantum and flavour, being ESG sensitive is extremely imperative.
Engagement with our anchor investor, the National Investment and Infrastructure Fund (NIIF) continues to enrich the YourNest team on this path of investing and nurturing in environmentally and socially conscious startups. At YourNest, ESG is not just a buzz word embellished before stakeholders, it is an integral part of our Nurture Capital philosophy.
Engagement with our stakeholders, particularly our portfolio companies, has been a revelation in this regard – as has been their commitment led by the founders themselves. YourNest has had an unprecedented level of engagement on ESG sensitization across the DeepTech ecosystem in India. Our discussions on this front have brought to light a unique set of risk mitigation opportunities overlooked by conventional investment management practices. Armed with a better understanding of the non-financial risks faced by our startups, we continue to reduce the inherent risks in our investments which has helped increase their value intrinsically and extrinsically.
To facilitate cross-pollination of ideas, solutions, and knowledge across startups in our Fund-III (YourNest Innovative Products VC Fund III) NIIF graciously agreed to host a training-cum-workshop on ‘Environmental and Social Risk Management Strategies for Early-stage Ventures’ at their New Delhi office. Unlike a nostalgic dollop of the theoretical Environmental Studies taught in school, the workshop was driven by case studies and focused on collective brainstorming of issues faced by new-age DeepTech startups.
A shout-out to the ESG Teams at NIIF, our portfolio companies and the YourNest team for coming together at the national capital and making this workshop fruitful and enriching.
The attendees included:
- Wiom: Sarang Juthani and Nikita Sewal
- Subconscious Compute: Anterpreet Virk
- Dozee: Vinay Pawar and Mahima Jain
- CredRight: Vani Bobba
- Exponent: Sanjay Bylal
- Miko: Anand Jha
- Contiinex: Prateek Mehta
- National Investment and Infrastructure Fund (NIIF): Krupa Shankar, Ashok Emani, Swarup Mishra, Rakhee Sunar and Raghavendra Padala
- YourNest: Girish Shivani, Amit Rapotra, Ujjwala Amba, Akshat Bhatnagar, Pranav Bafna and Vipul Arora