Navigating Turbulent Waters: Upaya’s Three Wave Strategy

Editorial

Apr 8

COVID-19 is perhaps the greatest test of our adaptability and resilience. We at Upaya have always prided ourselves on having a culture that touts these values, and the dire situation we are all facing now is an opportunity to truly live these values.

Although the developments day by day are different, and are far from predictable, we are keenly aware of the unsettling reality and what is needed to weather this storm. Along with the spreading of the virus itself – and all the associated health impacts – we are preparing for economic fallout, especially as the latter can deliver a staggering blow to vulnerable populations.

Upaya knows all about vulnerable populations. We have invested in 21 small and growing businesses in India that have collectively created over 15,000 jobs for the poor. We invest in highly marginalized rural and urban communities, those which most other investors deem as “too risky.” By providing much-needed capital and mentorship to these business owners, we’ve been able to create jobs and have seen prosperity emerging in these otherwise struggling communities.

COVID-19 now threatens to unravel those economic gains, and it would be easy to let the pandemic overwhelm us. Thinking of the crisis in three different waves (short, medium, and long term), and staying true to our core competencies as a team, has helped inform what actions we should take as we work with others to recover and rebuild:

First Wave - Emergency Relief

This is where we are now, collectively contending with the burdens on our healthcare system, shortage of protective equipment, and the far-reaching economic and social costs of shelter-in-place orders. Appropriately, the best community response at this time is to provide relief in the form of supplies, care for the sick, safe shelter for the homeless, and financial support for those who are suddenly unemployed.

There are equal parts art and science to providing aid to those reeling from a disaster. Upaya is not a relief organization, and although there is a great urge to do something, anything to alleviate immediate pain, the most helpful thing we can do at this moment is point our entrepreneurs to those organizations who are skilled in relief. In this first wave of addressing the immediate shocks, we are doing research, tapping our networks, compiling a list of rapid response funding, emergency interventions, and working hand-in-hand with our entrepreneurs to apply and avail of this support as quickly as possible. We are also hosting platforms for peer exchange – such as facilitated web conferences with all our entrepreneurs – so that they can share ideas and learn how others are coping.

Second Wave - Job Preservation

With the nationwide lockdown in India and the abrupt freezing of most major business activity all over the world, Upaya’s entrepreneurs have all been forced to pause their business activity. The economic ripple effects of this are starting to surface and will grow in the weeks to come. Those in the manufacturing sector, even if they had orders pending, are not able to run their factories to produce and deliver on those orders. Those in the skills training sector have had to curb their hands-on training programs and are unable to place any qualified candidates due to hiring freezes at their client companies. Even those in the agricultural sector are struggling … true, small-holder farmers are tending their crops and engaged in animal husbandry, but the marketplaces they usually sell into are shuttered, and they are resorting to more fragmented, informal local sales to scrape together an income. It is increasingly clear across our portfolio that wages are drying up fast for these vulnerable jobholders.

But the business owners themselves, Upaya’s entrepreneur partners, are also feeling the pinch. Most revenue sources are suspended, and it is unclear exactly when earnings will flow again. Prior to the crisis, many entrepreneurs had also lined up follow-on funding (debt and equity) to help expand their operations, but now, those investors have withdrawn their commitments as they assess the damage within their own portfolios. Our entrepreneurs want to provide paid leave or salary advances to their jobholders, but simply do not have the funding to do so.

Patient risk capital is now more important than ever. Investors like Upaya should not be fleeing the fire, we should be running towards it, equipped with the right tools and creative solutions to provide badly needed liquidity. Going beyond our standard patient equity product, we are banding together with other providers and designing financial products to help provide loan guarantees, address working capital needs, and links to bridge financing to help our portfolio companies survive the next few critical months.

Third Wave - Job Creation

Once the lockdowns are lifted, and people feel safe enough to resume their routines, we are prepared to quickly extend investment to new business models in order to rapidly create new jobs for India’s enormous workforce. For many of us, this is the first time in our lifetimes we have witnessed such large-scale unemployment, and as a society we simply won’t be able to fully recover until we create jobs for those who need them most.

Although we are still operating within swirling uncertainty, the Upaya team is currently building a pipeline of promising business ideas, staying in close touch with new entrepreneurs, advising them on their business pivots, and formulating a strategy for which models and sectors hold promise in the post-COVID era. Our hypotheses may need tweaking as the situation evolves, but it is still important to have a point-of-view and strategy. In this third wave, when the world is ready, we plan to accelerate new investment commitments and provide targeted support to a new generation of entrepreneurs who will help us return to a place of peace and prosperity once again.