original link: https://thegoodaipod.substack.com/p/-vikram-gandhi-managing-partner-asha

🎙️ Vikram Gandhi - Managing Partner @ Asha Impact & HBS Professor

Impact investing in India, DWDG portfolio companies, and sustaining impact

Nov 14, 2021

👋🏽 Welcome to Doing Well by Doing Good , a newsletter and podcast series highlighting the startups aiming to be profitable with a purpose.

_ Happy Sunday folks!_ It’s been a while since you’ve heard from me — turns out I had a few personal updates, I got engaged 💍 and ran the Boston Marathon 🦄 . And now that things have cooled down (and have recovered fully) — I wanted to share key insights from our conversation with Vikram Gandhi.

So let’s get to it! Vikram Gandhi is a Professor of Sustainable Investing at Harvard Business School, a long-time investor, and the Managing Partner at Asha Impact Fund, an India-focused impact fund investing in product and services companies across multiple sectors. If you’re curious about Vikram’s teaching at HBS check out his HBS profile page. You can also learn more about **Asha Impact Fund her e. **

Take a listen on Apple , Spotify , Anchor , or wherever you prefer to listen to podcasts. And if you like it go ahead and hit subscribe in your app to get notified as soon as we release them!

In this episode Vikram talks about his journey and the impetus for starting Asha Impact. We also explore their portfolio companies that are Doing Well by Doing Good and explore how impact investing compares to traditional finance mechanisms. We chat about how Asha Impact creates a flywheel by leveraging capital and policy advisory together to accelerate the impact of their portfolio companies businesses. As usual, check out the summary below to click to specific parts, or listen to the whole episode above. Enjoy!

Background

[[1:06](https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=r4PaGELnTnqawj3pJzhH6g&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=66 https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=r4PaGELnTnqawj3pJzhH6g&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=66)] Vikram’s journey to founding Asha Impact Fund

Vikram spent 24 years at JP Morgan and Credit Suisse in various roles as a traditional investor and capital allocator.
He became involved in philanthropy at that time and joined the board of the Grameen Foundation to bring micro-finance models to different parts of the world
Asha Impact started in 2014 with the goal of bringing traditional finance together with a development agenda (e.g. micro-finance) via impact investing in Indian markets.
He started a course on Sustainable Investing at HBS contemporaneously with Asha Impact to teach the fundamentals of impact investing.

What is Asha Impact?

[ [5:32](https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=wAa8kxLEQcOK_604IJbQaQ&context=spotify%3Ashow%3A4ZpKwhV1xihtsJzcOeKu9R&t=331 https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=wAa8kxLEQcOK_604IJbQaQ&context=spotify%3Ashow%3A4ZpKwhV1xihtsJzcOeKu9R&t=331) ] Asha Impact has two parts: an impact investment fund and a trust which acts as a thought leader and advisory business to facilitate policy change.

Asha Impact operationally functions as a traditional fund with a specific investment thesis on impact. Asha Trust is an advisory entity to help drive large-scale change via policy to mobilize the government, which Vikram describes as the world’s largest impact investor.
_ Example : Asha Impact invested in Janaadhar and Vastu —two affordable housing portfolio companies — which provide mortgages to the bottom half of the population and illuminated the broken parts of the affordable housing system. Since affordable housing is a policy goal for the Indian government, Asha Trust worked with local municipalities to catalyze policy change and increase investment dollars back into affordable housing initiatives further aiding the mission of Janaadhar and Vastu._

**[[11:22](https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=DfSfEpr4QkOJxKLDFXox6A&t=681&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=DfSfEpr4QkOJxKLDFXox6A&t=681&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx)] **Asha Impact Fund thesis & mission

Asha Impact is focused on businesses that serve the ~700M aspiring or rising middle class in India. This is unique since most investment firms focus on the top ~100M and government and non-profit spending focuses on the bottom ~500M living around or below the poverty line.
Asha Impact invests in companies servicing multiple industries — fintech, housing, micro-finance, agriculture, etc. but typically has a bend towards financial products.
Once Asha Impact decides a company has an adequate impact to the right target customer, they focus on standard financial metrics as any traditional investor would (e.g. IRR, KPIs, etc)

[ [21:40](https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=PScwQer8R8qrdJRtXSVRAw&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=1300 https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=PScwQer8R8qrdJRtXSVRAw&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=1300) ] Example of portfolio companies and their business models

Varthana is a financial services and inclusion company providing student and school loans servicing middle class schools. Asha Impact invested and helped the company grow to 5000 schools across India, then exited as it entered a private equity growth phase.
Nepra is a circular-economy waste management company that enables financial inclusion by providing an income source through local hiring, green waste management, and innovative methods to re-sell recycled plastics. Asha Impact invested in the company early on and continues to hold the position.

Doing Well through Asha Impact

[ [28:01](https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=T9NQqCoJTR-gI_yPifwNuw&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=1681 https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=T9NQqCoJTR-gI_yPifwNuw&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=1681) ] Is there a difference in business models between non-impact companies vs. impact companies?

Business models are typically pretty similar across these types of companies — but the investors and founders have a different mindset in each. For example, the tradeoff between short-term profits vs. long-term value will skew towards long-term impact vs. short-term profits for impact-minded companies. But both ultimately need to have long-term profits to thrive.
_Example : Janaadhar had the opportunity to move up market to increase short-term margins, but this would have been mission-drift since it would target a different more affluent target audience which is not in line with their mission. _

[ [32:50](https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=lWaLhC-BRhS_BAeaHii7XA&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=1970 https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=lWaLhC-BRhS_BAeaHii7XA&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=1970) ] Are there ever conflicts at the board level between impact and profits?

When the board and founders are aligned this goes a lot smoother (this is a common theme across all of our conversations with both founders of DWDG companies and their investors). Often founders prefer to have impact investors on their cap table to be a buffer against traditional investors who might push hard for profits despite it being counter to the mission.
Companies where the impact mission is embedded in the business model for growth (e.g. # of loans for a micro-finance bank) face less conflicts because impact and non-impact investors alike are incentivized to invest.

Doing Good through Asha Impact

[ [34:20](https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=GM0oiR-0RVmaXqyoblrZKA&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=2060 https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=GM0oiR-0RVmaXqyoblrZKA&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=2060) ] Based on your experience at Asha Impact, how can Doing Well by Doing Good companies stay true to their mission past the early stages and throughout their life?

Maintaining a close relationship between impact and financial returns throughout their lifetime enables impact companies to return the cost of capital, which incentivizes commercial capital and impact investors alike.
Identifying a large enough market with enough growth potential to tackle with an impact mission is key (e.g. targeting the aspiring middle class in India ~700M which is growing in terms of numbers and wallet share)
Vikram describes 3 types of investments— A : traditional commercial capital where the company meets traditional financial metrics— B : philanthropic or charity investments where the company is often non-profit and does not hope to return large margins—and C : high risk impact investments, the Doing Well by Doing Good companies where impact and profit are tied but aren’t returning capital consistently yet. Asha Impact and other early impact investors often invest in C , with the hope of turning the companies eventually to A.

Advice for Listeners

[ [40:40](https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=dMJjhoIzReKVqxdlbrLqGg&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=2440 https://open.spotify.com/episode/5oAQs3N9cOHhagvLPjbAUx?si=dMJjhoIzReKVqxdlbrLqGg&context=spotify%3Aepisode%3A5oAQs3N9cOHhagvLPjbAUx&t=2440) ] What is some advice you have for founders of Doing Well by Doing Good companies and the investors that invest in them?

As a mission-driven founder, keep focused on the mission but also have a deep focus on the bottom-line — without the latter the business cannot survive. Not surprisingly, founders coming out of for-profit businesses historically are more attuned to this given previous experiences.
As an impact investor, be vigilant and maintain strong investment fundamentals when deciding where to invest — Doing Well by Doing Good companies cannot sustainably achieve their mission without sound fundamentals, and consequently returns can’t be made without that.

Hope you enjoyed the summary above and the episode! If you enjoyed or think someone in your network might enjoy it as well, share this post below or directly forward the email.

And for reference here’s a quick references to the podcast again, if you want to share that directly.

Wishing you an enjoyable and productive week ahead!

👋🏽 Anand

Anand Sampat

Writing