The International Finance Corporation (IFC
), a World Bank arm, has begun providing first round funding - Series A cheques as they are called - for start-ups
. Until now, starting 2009, it had been funding entrepreneurs only at the second or third stage of funding - called Series B and Series C cheques respectively. For these smaller Series A investments, IFC has chosen to focus on start-ups in just two sectors - clean technology and agri-tech.
To share the risk of investment in startups, IFC is taking the co-investing route. In May this year it invested $1.6 million in Ahmedabad-based energy management startup Ecolibrium along with early stage fund Infuse Ventures. It has also committed to invest in Renewgen Ventures - a waste-to-energy start-up.
Early-stage investing involves much painstaking efforts in carrying out due diligence, which IFC recognises. "We spend a lot of time with these companies, understand their business models and the value chain," says Pravan Malhotra, Senior Investment Officer at IFC who leads its clean technology investments. "We are not investing from a fund, but from our balance sheets. We want to see developed business models and a clear path to profitability." IFC is aiming at an investment horizon of six to seven years in such companies.