An investment vehicle for small and medium enterprises

Thomas Hyland believes there is a dearth of institutional capital in the ticket size his firm looks at and the sectors it focuses on – agri-business, agricultural supply chain, education and access to finance for small and medium enterprises.

He is the Co-Founder and Partner of Aspada Investments, which Thomas describes is a permanent capital vehicle that provides early-stage risk capital to ventures that help create market linkages, improve livelihoods and provide access to essential goods and services. “It is really about looking at the backbone, nuts and bolts kind of infrastructure businesses that we think are important for the Indian growth story,” says Thomas, in a recent interview in his Bangalore office.

According to him, there are active angel groups and bigger ticket funds, but outside of technology in this space there are not a lot of institutional players. “We think these are sectors that are important to support because they do provide basic infrastructure not only in urban settings, most of our companies operate in rural areas as well.”

Aspada – Thomas says it is a Sanskrit word that has different meanings like opportunity, business with a literal meaning as in seat of power – typically invests in the range of ₹5-20 crore in several stages, for a significant minority stake.

For Thomas, 36, a New Yorker with experience on Wall Street, and an alumnus of the Indian School of Business, Hyderabad, the India journey began in 2005 when he first came here as a backpack tourist. “I spent almost a year here, rode sleeper class trains across the country and lived on a couple of hundred rupees a day and travelled extensively. And, decided this is the place I wanted to be at some point, personally as well as professionally.”

That is when ISB happened. It was at ISB that the seeds for his venture, Aspada Investments, were sown. The SONG Investment Company, an equity fund focussed on small and medium enterprises, backed by the Soros Economic Fund, Omidyar Network and Google was being set up at the ISB. Aspada now manages the SONG Fund along with a fund that it has raised.

As SONG started to finish its investment period, the discussion was on what next. This is when Thomas and Kartik Srivatsa, Managing Partner, Aspada, suggested to the Soros Economic Development Fund to create a new investment vehicle around it. They tweaked the model a bit, from both the fund’s and the entrepreneurs’ perspective, according to Thomas.

Unlike a traditional venture capital fund, which has a finite life, Aspada has been set up as a holding company, which means it is a permanent capital vehicle. “In theory, what it means is we can invest in a company and stay invested forever,” says Thomas.

Aspada will look for returns and exit option, but it will stay with a company it has invested in far longer than the five-six years that most funds do. Aspada has about $45 million under management, of which $17 million was under the SONG Fund.

According to Kartik Srivatsa, 32, an alumnus of IIT-Madras and who has worked in McKinsey and other places, Aspada looks at a 20-35 per cent stake in the companies it invests in. “We don’t want to have too many portfolio companies because these are businesses that require lot of functional capabilities and operating bandwidth. We help the companies in a lot of functional areas,” he says.

On the investment climate, he feels there is a significant lack of capital in the early-stage space, especially outside technology. “We see that space continues to be under-served in terms of the number of funds or fund managers looking at it. That is where we want to close the gap,” adds Kartik.

Capital efficiency is important, says Thomas, on Aspada’s investment strategy. “We don’t invest in heavy real estate assets. So, if someone comes to us with a hospital, they may be looking for money to build a hospital that might not interest us. We would rather be in providing services and the delivery around hospitals and not only the infrastructure,” adds Thomas.