For a school dropout and someone who had grown up doing odd jobs since his teens, H. Rajesh, 35, seemed to have done well for himself. Studio Essential, the unisex beauty salon that he and his cousin V. Dhayalan started in Chennai's upmarket Nungambakkam area in 2004 had grown steadily in reputation and size.
From 300 sq. ft initially, it had become a 2,500 sq. ft salon by January this year, giving tough competition to its branded rivals in the neighbourhood. The salon's success prompted Rajesh to think of opening its second outlet in the city. But funds proved elusive. "I did not have enough savings," he says, adding that the banks were willing to give a loan only against securitised collateral, which would have been just enough to meet only his working capital needs.
Rajesh felt frustrated and stuck, until he stumbled into VenturEast Micro-Equity Managers, which manages the BYST Growth Fund. Thanks to a Rs 15 lakh equity infusion and mentoring by the fund, he was able to open his second outlet, a 1,500 sq. ft salon in the posh Anna Nagar neighbourhood, barely five months later.
"The transition from a hairdresser to a businessman is not easy and I am still learning. If VenturEast had not stepped in, my expansion plans would have been delayed by three years. It would have taken even longer to run the business professionally,'' he says.
|Micro-equity vs other financing models|
Offers loans varying from a few thousand rupees to a few lakh and targets the impoverished segment
Provides equity to start-ups with some amount of mentoring, but looks at high-risk business models with exponential growth
Comes in at the angel stage for additional funding requirements or in the next stage when the business still has some risks
Comes in later when the business has grown and the risks are almost mitigated and the company can, in the near future, approach capital markets for funds
Provides equity to common businesses that are not startups but have reasonable growth potential; does considerable mentoring