Budget 2019: Social stock exchange to attract VC funds, impact investors toward social startups

Budget 2019 India, Union Budget 2019 India, Budget 2019, Budget 2019-20

Budget 2019 India: Nirmala Sitharaman had proposed “an electronic fundraising platform – a social stock exchange.”

Budget 2019-20: Structurally, social startups possibly lack the flexibility in raising capital from angel or venture capital investors, unlike a regular technology startup. Exiting from a social startup cannot be certain as they look at creating impact for the long haul even as the scalability cannot be assessed for the near future because of the ‘impact’ nature of the business rather than acquiring more users through discounts. Moreover, investors usually look at similar successful businesses to validate their investment decision but that doesn’t exist in most of the social venture markets.

However, listing on an exchange can be a viable alternative for impact startups to raise funding. Hence, on the lines of the Social Stock Exchange in the UK, SASIX in South Africa, Impact Investment Exchange in Singapore, SVX in Canada, the Indian government is planning to have its own stock exchange for social or impact startups.

Nirmala Sitharaman in her maiden budget speech proposed “an electronic fundraising platform – a social stock exchange” for listing social enterprises and voluntary organizations “working for the realization of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund.”

“Social enterprises are playing a very significant role in solving real problems in education, healthcare and financial inclusion. The Electronic Fundraising Platform acknowledges the problem of investment fundraising for such organizations,” said Piyush Jain, Co-Founder and CEO, ImpactGuru.com. This will have “VC funds, impact investing funds and HNIs taking a greater interest in the entire social enterprise ecosystem,” he added. ImpactGuru is a donation-based crowdfunding startup serving NGOs, social enterprises, startups and individuals.

In India, the social impact startups are growing at 20 per cent annual rate while there are more than 400 such startups, IANS had reported in November last year citing a tweet by Sangeeta Gupta, Senior Vice President of Nasscom.

“The business correspondent (BC) industry is not regulated. Corporate BCs being able to register on the stock exchange will lend it the much-needed legitimacy and visibility. The exchange can in turn act as a connector, linking social impact companies with impact funds and potential customers,” said Seema Prem, CEO, FIA Technology Services.

However, “what it translates into and how it works will have to be seen. We are looking for the fine print, how SEBI will react to this, what structure will come,” Padmaja Ruparel, co-founder, Indian Angel Network told Financial Express Online had told Financial Express Online.


Author: Lili