Bangalore:
A network of micro-level entrepreneurs specializing in wooden
furniture, toys and apparel from villages around Bangalore will receive
$3 million (more than Rs12 crore) as funding from start-up financiers
Nadathur Holdings and Aavishkaar India Micro Venture Capital Fund.
Also
chipping in will be the Canadian chapter of CARE, an international
non-governmental organization fighting poverty, and Volkart
Investments, the commercial lending arm of Swiss agency Volkart
Foundation. Their aim is to help transform MAYA, a Bangalore-based NGO
that was founded in1989, into a commercial venture in which the workers
will own a portion of the equity and also receive a share of the
profits. The new entity is being called Maya Organic India Pvt. Ltd or
MO.
The investment also indicates the growing interest of
venture capital firms (venture funding is seeing a renaissance in
India) in atypical microenterprises. MO will focus on the marketing,
design and development of products that will be sourced from clusters
of self-help groups. “For every Rs100 earned by MO, the cluster of
producers will receive up to Rs45…(and) 10% to 15% of the equity in the
company will be offloaded to the workers,” says J.P. Solomon, the NGO’s
founder and MO chief
Getting noticed: Maya Organic chief executive J.P. Solomon (second from right) in the workshop.
executive.
Last
year, MO earned Rs3 crore retailing wooden toys under the Moogli brand,
MO-branded designer furniture and supplying apparel. Exports to the UK
and South Africa contributed more than half of the earnings. In a world
dominated by plastic and stuffed toys from China, “Moogli toys do not
need any window dressing; it sells itself,” says Norina Williams,
director, Y-Organix, a Cape Town, South Africa, based distributor for
eco-friendly products.
MO first began as a vocational
training unit set up by MAYA—short for Movement for Alternatives and
Youth Awareness—that was active in the area of child education and
adult livelihood projects. As the market for its range of eco- friendly
handcrafted furniture and toys picked up, MO channelled grants from the
Ford Foundation, Volkart Foundation and the America India Foundation to
help groups of workers set up their own micro enterprises. Today, there
are three large clusters that the company draws from.
A
220-member group of garment workers turns out pre-shrunk and
hand-embroidered apparel. From Channapatna, a town about 50km west of
Bangalore, a cluster of 100 workers produce a range of wooden toys
coated with ‘lac’, a natural resin, while a third cluster produces the
MO brand of furniture. “We have invested close to Rs4 crore to set up
the back-end at each of the three clusters we source from,” says
Solomon.
But as the domestic market for branded furniture,
estimated to be worth Rs3,500 crore by CSIL Milano, a specialist market
tracker, grows at 20% annually, MO is finding that size of operations
matters. The inability to scale up quickly was most visible while
selling to institutional buyers, who form the bulk of MO’s clientele in
India. “I have placed orders worth Rs14 lakh with Maya Organic for a
single project, but if I had an order for Rs1 crore to be delivered in
45 days, I don’t think they can deliver,” says M. Shashidhar, director
at Cicon Engineers, a building consultancy firm in Bangalore that
counts MO as one of its vendors.
Customer feedback of this
sort led Solomon and team to decide that an NGO structure was not
suitable for their operations any longer. “For us, the interest in Maya
Organic comes from its scalable business model and the way in which
commercial potential has been allied with social causes,” says Anand
Nadathur, director Nadathur Holdings, a Bangalore-based investment firm
that also runs a technology venture capital fund, Ojas Venture. The
firm, founded by N.S. Raghavan, a former joint managing director of
software services vendor Infosys Technologies Ltd, has in its portfolio
start-ups engaged in activities ranging from spice cultivation to
aerospace engineering.
MO will use the venture funding to
expand the supply network of the company and to set up a chain of new
retail outlets across the country. “Till now, about 20-odd self help
groups with 350 members form part of this network. The aim is to take
this to 7,000 micro enterprises in five years,” says Sanjay Anandaram,
a partner in Bangalore-based JumpStartUp Venture Fund, who mentored MO
during its transition from an NGO into a commercial venture.
Investors
such as Vineet Rai, managing director of Aavishkaar Venture, who
expects to invest up to Rs2 crore in MO, say the challenge for the
company will be to merge the social entrepreneurship principles on
which it is based with the hard-nosed business decisions that a
commercial venture demands. “Over time, we expect to invest downstream
in the micro enterprises which will supply products to MO,” says Rai.
This is not the first time an NGO has spun off commercial ventures. In
Bangalore alone, a similar effort by another NGO, Technology
Informatics Design Endeavour, or TIDE, has spawned over 15 small micro
enterprises as independent companies, with a combined turnover of up to
Rs2 crore. “By being focused in the areas of furniture, toys and
apparel, MO will be able to build scale into operations that are the
really big differentiator,” says Svati Bhogle, chief executive of TIDE.
