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CEO Inaara Impact Ventures, Sadia Malik laid the foundation of Pakistan’s first indigenous impact investment fund to fuel the growth of social enterprises in Pakistan. Inaara, meaning light in Arabic, takes inspiration from Acumen Fund and Root Capital with a vision to accelerate social startups that are working on the agenda of Sustainable Development Goals (SDGs).
Inaara Impact Ventures is backed by a family conglomerate with additional funding sourced through support groups and global angel investor networks.
‘We conceived Inaara Impact Ventures in 2016 when the SDG agenda was taking off. At that time, Pakistan had already missed on the indicators of Millennium Development Goals. Therefore, I wanted an SDG-focused vision with an effort to improve the Human Development Index (HDI) of Pakistan”, Sadia shares with TechJuice.
Building a sustainable impact
Initially, Inaara Impact Ventures focused on four SDGs pertaining to the eradication of poverty, affordable and clean energy, gender equality, and industry, innovation, and infrastructure. There was only a limited number of local startups building solutions to achieve these goals. Therefore, the impact fund has now decided to open up to the wider landscape of SDGs and include more goals.
Inaara Impact Ventures has already invested in four social startups, one of which will be launching a grant pilot project this year. The fund has been able to create over 2,000 unique jobs in the country with its startup investments, focusing on empowering startup founders, who have limited exposure and means to access resources and network in the local entrepreneurial system.
The first equity investment of the fund is in Freightex, lead by Umair Atta from Rahim Yar Khan. It is a freight and logistics startup using IoT based solution for B2B and B2C consumers. With the investment, the startup has been able to create 1400 jobs and successfully closed a Series A funding.
Tecbeck, a digital economy platform for Pakistani freelancers, is the second startup that has raised an equity investment from the fund. Lead by a Faisalabadi duo, Maryam and Obaid, the startup has created 880 unique jobs, becoming cash positive in its second year of operations.
Moreover, Inaara Impact Ventures has also provided grant funding to Jaan Pakistan that utilized the funds to provide 100 clean energy stoves impacting 800 lives. The project is lead by Khizr Imran Tajammul from Lahore. Another grant project of the impact fund will be piloted by Her Ground, lead by Sadaf Naz from Okara impacting 500 teenage girls through female hygiene awareness.
Need for an indigenous valuation system
Inaara Impact Ventures believes there is a dire need to develop a localized indigenous valuation system for Pakistani startups. Startups end up wasting months and sometimes years evaluating themselves in billions of dollar often fail to raise a round. Moreover, conventional investors in the local entrepreneurial ecosystem still look for tangible assets, and local startups often do not have these assets and therefore, their valuation becomes incoherent.
“I interacted with a couple of social startups in 2017 that have not fared very well. They had to switch to the consultancy model and deviate from their vision. Often local startups get hallucinated with million dollar valuations and do not end up anywhere, losing crucial time”, Sadia shares of her experience of interacting with local startups.
Therefore, the impact fund looks for startups that demonstrate perseverance and long-term commitment. They believe that financial statements and 5-year projections exist on paper and do not necessarily translate into action. Sadia shares the example of Tececk that has been sustaining for over two years now, despite seed funding running out.
Leading a venture fund
As a female investor, the biggest challenge that Sadia faced was a lack of network in the startup ecosystem. She started to interact with the stakeholders in the ecosystem and participated in various startups events to look for investment-ready startups. She shares her experience,
“I realized that most of the activities were a facade. I could see MoUs being signed and partnerships fostered but nothing tangible coming out of it. Majority of my startup deals are now channeled through a closed loop of friends and VC’s”
After going through multiple pitch decks of startups, Sadia has identified two ends to the startup spectrum. Startups lead by founders in their mid-thirties or forties with some global exposure have the capability to raise funds, develop a network, and are in a better position to take off. Then there are startups lead by small city founders, with no foreign degrees, limited understanding of pitch decks, projections and startup vocabulary but viable business ideas. These are the startups that Inaara Impact Ventures wants to support and work with.
Moving forward
The ticket size of the investments ranges from $20,000 to $30,000 and can go up to $50,000 based on the market size of the sector.
This year, the impact fund is looking at diverse sectors to invest in, with a strong focus on women-led startups. Inaara Impact Ventures is looking for startups working in agriculture, food and processing, vocational and life skills, circular economy, and tourism space.
The ticket size of the investments ranges from $20,000 to $30,000 and can go up to $50,000 based on the market size of the sector. By the end of 2019, the impact fund will be investing in two more startups to expand its portfolio.
The frequent investments of Inaara Impact Ventures indicates their understanding of the challenges faced by Pakistani social startups and how seed investments are critical for social startups to pilot their solutions and take flight. With this momentum, the impact fund will soon emerge as one of the key indigenous impact ventures from the country.
The story has been produced in collaboration with Inaara Impact Ventures.
