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Frequently Asked Questions (FAQs)
Our Purpose
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Climate Change is the greatest and most urgent global challenge of our generation, and it affects the poor, the vulnerable and the commons disproportionately. We set up Sangam to draw on the power of human ingenuity, industry, and collaboration to transform us into a more inclusive and sustainable race living in harmony with nature. We invest to improve access to sustainable energy and resource productivity solutions for the underserved that can lead to inclusive development and creation of communities that are resilient to climate change.
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Most of Climate Change is anthropogenic (human-driven). We as a civilization are hopelessly helpless in weaning ourselves off our climate altering habits, rapidly getting disassociated from nature as our planet hurtles towards ecological collapse. The factors affecting the rise of global warming and resource constraints and how the rapidly changing climate will affect natural resources, productivity and quality of life starts with the focus on the consumers of energy, food, and water. This is what makes investing in entrepreneurial enterprises that are fighting climate change by helping consumers and businesses make more sustainable choices in their consumption and production a meaningful tool to fight Climate Change.
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Yes, we are an impact first fund. Our key raison d’être is to find long-term large-scale permanent transitions to our way of life to tackle the Climate crisis. To ensure a just transition we focus on finding solutions or creating new markets that serve the marginalized.
We only invest in enterprises that actively contribute new solutions to tackling the climate crisis and entrepreneurs who are working on some of these hard challenges that are not finding support from mainstream investors. Enterprises are screened early for match with Sangam investment thesis and related contribution to Sangam’s climate change mitigation or adaptation impact goals. -
We are a climate change mitigation and adaptation focused fund. We have picked sectoral focus areas based on their large-scale irreversible climate mitigation and resilience potential
1. Energy Transition
• Technologies that accelerate decarbonization of energy
• Fit-for- purpose energy storage & high efficiency components and appliances
• Electric, alternative fuel & shared transport solution
2. Resource Productivity
• Industrial heat & power efficiencies & recycling
• Alternative low-carbon materials & reduction in fossil-based product use
• Low cost & energy efficient refrigeration technologies
3. Climate-Smart Land-use
• Climate resilient agriculture, agro-forestry & watershed management
• Improve soil carbon & soil microbiome while minimizing soil erosion
• Farm-positive agricultural supply chains, residue & waste management
4. Inclusive Economy
• Generate opportunities for better livelihoods and wealth creation
• Future-proof technology development & adoption in SMEs
• Resilient communities that preserve local culture & biodiversity
We follow secular drivers for investing in clean technologies for emerging markets including rapid population growth and urbanization, stressed natural resources, productivity gap in SMEs and agriculture and consumption-driven aspirational growth of consumer markets.
Investment Strategy
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We have taken on the mandate to deep dive into sectors that are significantly underinvested to build the conviction to make early-stage investments to move the sector forward. This allows us to see opportunities where others don’t. Our additionality as a fund manager is driven by
1) Mobilizing capital to clean technology innovators struggling to access early-stage risk capital
a) By driving Seed to Series-B investments - by ourselves if required
b) Acting as lead investor - to crowd in other investors where possible
c) Providing adequate and flexible early-stage risk capital
2) Growing new markets by focusing on nonconsumers and the underserved in low-income regions of India and neighboring countries that can be transformational in generating irreversible long-term impact.
3) Once invested, we take our thesis work forward by working actively with the investees to commercialize their innovations by helping them engage with the right customers, partners, and talent. Along the way, we create great inclusive places to work.
4) We leverage our in-house incubator and accelerator programs to de-risk investments into nascent sectors by building an ecosystem around the start-ups even before we invest. -
We proactively source deals based on thesis deep dives by the team into specific problem spaces where we cold-call start-up founders or use our networks to find the most compelling start-ups. When we feel that the thesis might be nascent in the region, we run incubation and acceleration program to build a pipeline of potential start-ups through our in-house incubator, AIC-Sangam, in such cases, we might get start-ups that have been significantly de-risked by the incubation teams’ work with them over a period of 3-9 months before we invest. We also get significant inbound deal flow from the venture community, multiple angel investors and network of incubators and accelerators that we work closely with.
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Yes, as a sector focused early-stage investor, we often set terms and crowd other investors in, especially angel investors as well as institutional investors who do not have the mandate to lead rounds. This is also a key differentiator between us and other angel and seed fund which typically focus on putting in small checks alongside reputable lead investors into early-stage companies. Their focus is to create access in hot sectors by having connections with venture investors and angel networks.
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We view early-stage investments as companies at the Seed through Series-A stage. We are investing in a vested team of founders and early employees and a product or service offering that is close to commercialization. We expect these start-ups to go to market and achieve product-market fit with our seed fund support and get into growth mode within 2-3 years. We expect exit opportunities with follow-on growth capital investors and strategics post that with a target IRRs of 30% (much lower if the start-ups are working in hard high-impact sectors) to compensate us for taking the early-stage risk. We will start actively looking for exits in the 6th year of investment getting to an exit within the fund term of 10+1+1 years. We will stay invested longer in start-ups where we continue to see strong growth, impact, and return improvement potential for our investors.
On returns, as a fund manager, we cannot guarantee returns, investing in start-ups comes with a strong risk of failure and loss of capital but relative to a traditional fund, we are looking to put your capital to use as much as possible to back start-ups and keep our fund management and other fees to a minimum by taking on new commitments as we go. -
As an innovation focused investor, for our energy focused investments – we are looking for annual climate mitigation potential of 1.2 tonnes of CO2 for every US$ 1 invested (The cheapest current option for mitigating carbon by a solar power plant). The Core Impact KPIs that our investments contribute to are
• Tonnes of Carbon mitigated / sequestered (tCO2e)
• Capital mobilized for sustainable innovation (US$)
• Underserved populations provided access to basic services and improved climate resilience
• Tonnes of waste reduced or processed, and non-renewable sources of production replaced
• Direct & indirect jobs creation with focus on equitable participation of women in the workforce
• Replication of innovations to other emerging markets
• Increasing the flow of technology and finance to emerging markets
We track ESG risks in the portfolio as it matures based on the IFC Performance Standards -
We are looking to generate irreversible long-term climate change impact. Towards that end, we align ourselves to global standards and best practices to help make the climate change sector an attractive destination for entrepreneurs and investors
• Adopt good governance practices – based on the IFC Performance Standards
• Applying a gender-lens – we are joining the 2X Challenge
• Adopting the Impact Management Project’s principles to define fund manager’s contribution
• Aligning ourselves to the UN Sustainable Development Goals and GIIRS Impact Ratings
Fund Structure
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The Fund is incorporated as a Protected Cell Company, PCC, under the Protected Cell Company Act 1999 of Mauritius. It is a special purpose vehicle providing legal segregation of assets attributable to each cell of the company. Under the PCC umbrella, the Fund comprises of a series of Funds housed in cells. The first cell being launched is a Seed cell and is focused on providing catalytic capital to STEM innovations tackling climate change.
The Seed Cell will invest from the seed stage up to Series-A (will invest in Series-A if required, early Series-A rounds while the start-ups are still pre-revenue). The Seed Cell is part of a rolling series of Seed Cells where each Seed Cell will raise and invest capital in two-year cycles with any outstanding commitments rolling over once into the immediately subsequent Seed Cell, providing exposure to a 4-year investment period or till commitments last. Any commitments leftover net of future expenses is extinguished. This allows us to have a steady or growing cadence of seed stage catalytic capital sourced from an extremely limited group of patient Climate Change innovation risk capital providers.
• Target size - US$15,000,000
• Target date for first close - 31st March 2023
• Target date for final close - 30th September 2024
• Minimum investment - US$250,000 -
We invest in STEM-innovation driven startups that have significant commercial and impact potential but are struggling to access early-stage risk capital. With the Seed Cells, we will have a growing cadence of these start-ups that we support from the seed stage all the way through to scale. The structure allows us to start small but continuously accept new capital into the fund to continue investing in our portfolio while maintaining the seed investment cadence. To ensure judicious use of extremely scarce patient Climate Change innovation risk capital we are looking to step into our start-up founder’s shoes and do high-resolution fundraising . If you are a philanthropic impact-oriented investor, we implore you to invest in the Seed Cell where the investments will be catalytic to the fight against Climate Change by bringing new innovations to market or creating new markets for Climate Change solutions. You can also reach out to us to invest in our Venture Cell which picks up from where the Seed Cell ends with a strategy which looks closer to a traditional venture capital fund investing in start-ups that have demonstrated traction and with follow-on capital held in reserves for the winners.
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Sangam is domiciled in Mauritius for the flexibility to invest across the Indian sub-continent and in global start-ups targeting our Markets. Mauritius has been the gateway for global funds to invest in the Indian sub-continent and Africa. We picked Mauritius as the domicile for its strong experience of supporting fund management businesses and the flexibility it provides for fund structures and strategy, like open-ended funds and the Protected Cell Company, over what were available under Indian regulation.
Seed Fund
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We see too many investors lament that there are not enough investment ready start-ups while start-ups complain that investors keep waiting and watching for the start-ups to become investment ready. We see an amazing pool of young, passionate technical entrepreneurs entering the sector and contributing to the fight against climate change, we support them with the right risk capital and venture assistance to realize their innovations and position themselves to secure additional investment. We are in-effect fighting the streetlight effect (see below).
The streetlight effect, or the drunkard’s search principle
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There is a strong investment case for catching start-ups early and molding what product-market fit and their impact looks like. Almost all the top global VCs look to invest early. Top global venture investor, Greylock focuses on investing from idea to IPO with active seed stage start-up teams working out of their offices. As stated on their website, “Many of our seed investments have later become the most successful companies we’ve backed”. Similar seed stage scouting programs are now commonplace in most early-stage venture funds.
Managers who can play in the starting up zone / pre-scale-up provide superior returns. The key to driving success in the cleantech sector and avoiding the past pitfalls of cleantech investing while making early-stage investments are
We believe our Seed Fund strategy will provide disproportionate returns to our investors while positively driving growth of the climate change innovation ecosystem. -
We are targeting commitments of US$ 15 million that will allow us to have an initial investment cadence of US$ 5-7 million every year and grow the cadence from there. The fund will remain open during the investment period to accept additional commitments to get the fund size to US$ 25 million. Any commitment left over will rollover to the next Seed Cell.
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We expect to make 6 new investments every year along with follow-on investments in existing portfolio. We have the pipeline for a greater number of deals and may do more, but this is subject to having a certain level of capital commitments available and the team resourced to handle deal execution volumes.
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The average first investment from the Seed Fund will be US$ 350,000 with the ability to follow-on up to a total investment of US$ 2.5 million. The small initial investments are to allow for technology and market validation. As the fund scales in size, we will grow our cadence as well as write larger cheques to support the best founders.
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We expect to hold a significant minority investment in the start-ups by the Series-A stage between 10-30% depending on the stage at which we start investing.
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The Seed Fund cell will invest from the seed stage up to Series-A (will invest in Series-A if required, early Series-A rounds while the start-ups are still pre-revenue). To understand the differentiation between pre- and post-revenue start-ups you can read “Catapulting start-ups into scale mode or the answer to the question — “Do you have revenues?” by Sangam founder, Karthik Chandrasekar. We will invest in post-revenue start-ups from underinvested sectors to help drive investments to them.
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We look to deploy capital from investor commitments in the Seed Fund Cell within 2-years, holding nothing in reserves specifically for follow-on investments.
If we have any investor commitments left over at the end of the 2-year period, we rollover the commitment to the subsequent cell with the same strategy and the rolled over commitments become part of the new cell’s commitments to invest. Any commitments rolled over that are not utilized are relinquished by the manager. -
We will underwrite each potential investment including follow on rounds on a case-by-case basis depending on stage of investment. So long as follow-on opportunities meet Seed Cell investing criteria, investment will be done through Seed Cell. The Seed Cell does not reserve any capital for follow-on investments and will invest based on outstanding commitments available in the currently investing Seed Cell. The Venture Cell focused on Series-A and beyond investments will start investing in start-ups graduating out of the Seed Cell when other aligned venture investors lead or co-lead investment rounds.
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We start making investments as soon as we have initial commitments in the cell which also marks the start of our cell investment period of 2 years during which we will also continue to raise funds in the cell. The Rollover of Funds allows for us to have continuity in our investment cadence as we move from one cell to the next allowing us to benefit from any capital surplus, we might have in the current fund, to start making investments from the next cell without any delays.
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Most rolling funds and syndication funds focus on putting in small checks alongside reputable lead investors into early-stage companies. Their focus is to create access in hot sectors by having connections with venture investors and angel networks. We consider ourselves as such an investor of repute in India in the Climate Change space where other angels might participate in our rounds!
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We considered an evergreen fund and our initial commitment from the DOEN Participates fund was to design an evergreen fund where they have supported other evergreen funds like Aqua Spark in the past, what we have is an evolution of the thought process to something closer to the market and more pragmatic. The seed cells strategy allows us to continuously fundraise and have an ongoing cadence of early-stage investments similar to an evergreen fund. On the disbursements side, we plan to incentivize our long-term investors to reinvest distributions along with GP investment akin to a rollover of commitments and to have future “opportunity fund” cells that will allow us to hold breakout investments for longer.
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Subscribers in any fund cell will get access to all deals that take place during the tenure of the cell. Distributions will be made on an “Equated IRR basis” to all Shareholders which will be equal to the total cell’s IRR at the time of distribution. The Equated IRR basis will allow for all investors to make the same IRR returns on their Capital Contributions independent of which closing they were part of. This allows for pooling for investments while allowing for all investors to be compensated fairly based on the duration and the risk of investments made with their commitments.
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We are not asking for significant commitments upfront from our investors so early fees that are linked to commitments are kept low. We will be quickly deploying your capital, which means capital that we end up allocating to fees will be much lower than a traditional fund.
On returns, as a fund manager, we cannot guarantee returns, investing in start-ups comes with a strong risk of failure and loss of capital but relative to a traditional fund, we are looking to put your capital to use as much as possible to back start-ups and keep our fund management and other fees to a minimum. -
We are targeting a first close of US$ 10 million for the first Seed Cell. We will start investing as soon as we have initial commitments.
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First Close Date – 31st March 2023
Final Close Date – 30th September 2024
