314: Eva Yazhari: Bringing Hope and Finances to Rural India and East Africa

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How can you align your values and money and invest in social enterprises that truly make an impact?

Eva Yazhari

Eva Yazhari is the CEO of Beyond Capital, an impact investment fund that invests in for-profit social enterprises throughout India and East Africa. They invest in businesses that are focused on greater access to health care, water, sanitation and energy, as well as food security and financial inclusion, which can increase the quality of life and standard of living for consumers at the bottom of the pyramid. Though they seek market rate financial returns, Beyond Capital is structured as a non-profit, which permits them to emphasize fidelity to their social mission alongside their financial mandate.

Eva Yazhari is also the co-host of the Beyond Capital Podcast, and Founder of the online magazine, The Conscious Investor. Throughout her fifteen-year career, Eva Yazhari has worked in the impact investment, finance, and asset management industries. She’s an angel investor and a proponent of the 100 percent Impact Portfolio approach.

What We Discuss With Eva Yazhari in This Episode

What inspired her to leave Wall Street and focus on impact investing
Who were her early adopters and how did she attract them with her message
What Beyond Capital looks for in the social enterprises they invest in
How do they measure impact in the business and local community
The structure of their team and how they are able to recruit top talent as volunteers

Transcript Highlights

How did you get started in impact investing?

Almost 11 years ago I was sitting at my desk on Wall Street and thinking a lot about what more there could be for me as a finance professional, and how I could use my skills for good.

I grew up in a family with a history of public service. My grandfather started a health clinic in Tanzania in the 1950s and he moved his entire family to Africa, which included five children and then extended to nine children by the time he returned to the U.S. in the late sixties. I grew up with those stories of public service all around my family and it became a part of my DNA.

When I was working on Wall Street in the hedge fund industry primarily, I saw a lot of things that I came to terms with as not being okay. One of them was the subprime mortgage trade, which was made very famous by the movie, the Big Short.

I’ll never forget walking out of the pitch for that trade from a hedge fund manager that we were invested in, where we literally said “this can’t be possible”. It cannot be possible to profit from the demise of individual families who have taken out mortgages that are not appropriate for them.

And that was a little bit of an AHA moment for me – to try to think differently and in a way where investing can be done with awareness.

I decided to start Beyond Capital as a way to use my skills. I co-founded it with my husband, although I run the day to day. We use our collective skills and the skills of our networks to invest in companies that have a social impact attached to them – coincidentally for my family background, in Africa as well as in India. We have an investment in Tanzania, which I think really helps it come full circle.

Tell us how you started, gained your first investors, and some of the roadblocks you faced.

I really think it comes down to personal motivations. One of the women in my network who, arguably is one of the first impact investors, made her money in Silicon Valley, but also had a very similar upbringing. She grew up in Hawaii, saw the fragility of nature and did one of the early environmental design programs.

While she practiced as an architect, she realized that sustainability really wasn’t of interest to her clients, but it was very core to her being. And so when she exited a number of companies that went public that she had worked for and received stock, and she and her husband thought a lot about how they could build a movement, which has become impact investing.

They’ve been a beachhead for impact investors to learn from and they really pushed the envelope. But it’s because of the personal motivations that they both had.

Similarly with Beyond Capital and my story, I’m really bringing my passion to the table.

In terms of resource attraction, something I’ve learned from Coach Karen Eldad, who has been my coach for about three years, is helping people understand the opportunity for them. If I’m going to be a little vulnerable here, we spent the first six years very insular as investors. I’m a mathematics major and a deal person. I love the deal process. I love due diligence. But frankly that wasn’t enough to build the movement.

We stepped up and started communicating differently, being more artistic in the way that we communicated our work, tapping into the creative side and speaking to a wider audience about what impact investing is and, frankly telling them, this is an opportunity for you to get involved. You know that this investing with awareness exists. But you may not know how to apply it to your life and here’s the opportunity to do so.

The roadblock was thinking that the work itself would actually be enough. The reality is that applying more creative energy to that work is what really opened up the movement. And now in addition to the investing that we do with Beyond Capital and the women’s health companies are the renewable energy access businesses that we’ve funded.

We’ve also launched a podcast where we interview purpose-driven leaders and are creating a stable of CEO’s that I can draw from and think about when I have conversations like this. It really is about personal motivation.

30 years ago recycling wasn’t really a thing, or at least for corporates, it wasn’t really a thing. Sustainable supply chains weren’t really a thing. Even manufacturing, and doing it in a way that was kind to the employees that were working in that type of environment, was not really that important. But there were entrepreneurs doing it. There have been entrepreneurs doing this type of thing for decades and they’ve just been motivated personally to do that.

Who were the early adopters for you?

Initially it was our inner circle. Most people were drawn to our work because we are currently set up as a nonprofit as you mentioned. We take donations, invest that money and then we recycle that money over time.

One person put it very simply as it’s the gift that keeps on giving. You give a charitable donation and then your money keeps revolving. They found that really compelling when we started to open up and be more communicative and be more strategic about how we communicated our impact.

For example, we know that we impact the lives of 4.1 million people. We know that we impact the lives of 2.8 million women and we know that every dollar we invest improves 12 individual lives. And those were really tangible things that more people could hold onto.

Now we’ve had many donors from groups that we were never aware of. We’ve had people sign onto our website and become an ambassador, which is a level of commitment where people get to learn about investing. They’ve signed on without speaking to us and without having a personal connection to me.

When you start to be more communicative, you can attract more support, not only monetary support, but also energetic support and support in the form of skills and time, which the companies in our portfolio also really need.

So we saw it as a tremendous win-win. And really at the end of the day, that’s what we’re looking for in the resources, time, and people that we attract to Beyond Capital and the other projects that we’re working on.

Is your organization made up of volunteers, paid staff or both?

We’ve been really lucky to have some very long-term volunteers. They all comprise our investment team and they say that they’re having their second career at the same time as their first.

We’ve recruited them all from top business schools. They all have MBAs and have full time jobs, but they give us between 20 to 25 hours per month of their time to help assist with deciding where we invest.

They also travel to India and East Africa once or twice a year to represent our work. So they’re kind of an extension of me. When you’re running a nonprofit, you have to find ways to leverage. It’s also helped us maintain fidelity to our core mission of funding seed stage companies. We didn’t talk too much about our portfolio, but we are the first professional capital in all of those businesses.

So we’re investing between $50,000 to $00,000 to small businesses that really just need that first vote of support to grow and scale. Then we also have individuals that give us and the companies in our portfolio assistance. They provide expertise or financial modeling assistance and legal support, and help the companies do what they do better.

We have been able to pull together some volunteers, but I do believe that charities – nonprofits – need to be run like businesses.

At Beyond Capital we’re entering a new phase, so we are raising a for-profit fund in 2020. Not much will change because we’re operating like a for-profit fund. We’re just funded by grant funding. And I think that’s really important because we need to attract the best talent to the world’s most pressing problems.

What do you look for in companies that you invest in?

We invest in companies that improve the lives of people living under the poverty line. Over time we’ve had the luxury of refining our criteria. Meaning we have certain sectors that we invest in, health care, energy access, agriculture, financial inclusion, as well as livelihoods.

Those are all areas where people who earn less than $4 a day have access to basic goods and services. That’s what our core mission is.

But when it comes down to more broad strokes, it’s really about the people. We believe that we’re investing in people and we are looking for committed founders. For example, we’re in a renewable energy distribution company that sells solar lanterns in rural Rajasthan, India and is scaling throughout India. It could be an acquisition target for an Amazon, Unilever or other big company later on.

We get the question very often, “How do you know the company will maintain its social impact?” The answer is that we know the founder’s committed. We’ve known her, we’ve been invested since 2013, and we know that she is really behind this mission. So being able to prove that and show that I think is really important.

On the flip side, we also are very cautious of companies that portray a mission trap. Meaning they’re extremely enthusiastic about the social impact side, but there’s really no business model; because we are an investor. So being able to tell the story of how the company will also be sustainable from the ground up – what the unit economics look like in that business and being able to really walkthrough those qualities of the company with us is really, really key for us.

So those are the two sides because whilst we would not want to have an entrepreneur who is purely focused on business or financial profit, we know that that will take them off track from time to time. In the areas where we work, the reality is that time becomes a factor. It takes longer to build a distribution network in rural India than it might in Mumbai or Delhi or one of the other big cities. So we’re really looking for an entrepreneur that has that commitment to social impact, but also the rigor that goes along with it, to grow and scale.

So you’re looking for businesses in rural areas who are looking to bring their services to those areas but on a larger scale, correct?

Yes but they are local companies that are operating in India, Kenya, Tanzania, Rwanda and Uganda, the five countries where we invest. There a mix between local entrepreneurs and American or European entrepreneurs that have repatriated to those areas.

But they are between microfinance, what you described as Kiva, and larger scale investing – Series A, Series B, and Series C investing. We are really in the seed rounds of these companies and $100,000 is a lot of money in these areas, but it’s also not the whole round typically.

Typically the companies are raising between $250,000 to almost a million dollars in their seed round. The quality of companies over the past 10 years has gotten a lot greater and they have become more sophisticated straight out of the gate. So we’ve seen the seed rounds grow and grow, which is why we’re really excited about raising our for-profit fund because it will allow us more capital to deploy into more social enterprises.

Is the money donated all passed through to the companies? How does it work?

Our board covers our entire org expenses. Depending on somebody out there (listening) building a movement, how they plan to structure it, my first piece of advice would be to do so through a for-profit structure.

Especially having worked in the nonprofit structure for the past 10 years, we are very lucky to have our board fund our org expenses. So we can go to all of our donors and say, “you’re funding the companies.” They love that. Then when we get a return – and we do have one return where we doubled our money while improving 150,000 lives, by giving them access to eye care – we took that money and we were able to recycle that back into the portfolio.

Let’s talk about some fun stories that really inspire you and your team.

We’re very inspired by the impact on the lives that we’re having and the numbers and leverage effect that every dollar can impact 12 lives. The reason for that is when you put money into the business you kick-start growth. Since it’s a sustainable model, it grows and scales beyond your initial contribution to that investment round.

One example I’ll walk you through is ERC, which is another company we invested in, in 2013. It was founded by an eye doctor in India, which is towards the Northeast of the country near the Himalayas and it’s quite secluded. So there was no access to simple diagnosis, glasses, or cataract surgeries. This doctor saw that opportunity and started a business that was kind of like a hub and spoke.

So it had various clinics in the spokes and then in the hub was the surgery centers where people could go for their cataract surgeries; which helped improve almost every area of their lives. One of his patients, Guna, was born into a family of tailors. He sadly lost sight in one of his eyes when he was a child and then the other eye got infected. So he was not able to work until he went to the ERC eye care and got treatment.

Another really standout example is Frontier Markets and the 3,000 women that the company works with. The business started out trying to sell solar lanterns through a series of distribution channels of male sales people.

There’s often a guy in the village who has a little local ‘Best Buy’ and he’s also the DJ and he’s the hub for everything electronics. So they tried to work with that individual. But they slowly realized that there were women who had even deeper tentacles into the neighborhoods that they wanted to reach, and saw this win-win in bringing those women on as their sales agents.

They’ve since generated $3 million in income for 3,000 women. We’ve met some of these women. We met at two of them in October and they went from being housewives who were not able to leave their house – so there was no dignity in that role for them, and it wasn’t a choice for them – to being the breadwinner in their family. Now they have things like washing machines and blenders and obviously lighting in their house because it’s the crux of the business.

They really believe in the product, but being able to also walk through the streets of their village more freely, and leave their houses to feel empowered to be able to do that. So the emotional connection to the people that we’re impacting is I think really powerful for us as a team, for the volunteers, and for the people who get involved in our work. They love to hear these stories and see that firsthand as well, on the ground, which was something that we did in October with some of our donors.

How do you calculate and measure your impact?

Measuring social impact is a really important topic in the impact investment field. We’re very lucky because we are investing in socially minded companies. So it’s in their DNA to measure their social impact. But we do work with them upfront on setting up metric systems.

For instance, with the renewable energy distribution company, we want to know not only how many products are they selling, what their revenues are, and what their profits are, but also what types of products, how many women they’re working with to sell these products, and the average income of those females. Are those women saving that money? What are they doing with that money? How is it improving their lives?

On the customer side, similarly, how is having a solar lantern improving their lives and how has having access to other household goods that the company is adding over time improving their livelihood. And with that extra time, what are they doing? Are they working or studying or frankly, as the CEO said on our podcast – shock to the world – they’re resting between things that they’re doing.

That kind of connection to the story is important, but then having those metrics in place to substantiate it is key. So we collect data from all of our portfolio companies and that’s how we distill our investment and what impact that is having.

We also look at something called capital mobilization because one of our goals is to increase the amount of impact investment capital that there is for companies that we invest in. We have a reputation for doing very good quality due diligence, and helping them get to their next funding rounds and sometimes bringing in other funders.

So we know that the amount of money that we have invested has catalyzed 54 times the amount of capital that the companies in our portfolio have raised.

For me, this is not a job. This is a lifestyle and a mindset that gets me up every single day very fulfilled.

Talk about your Beyond Capital Podcast that allows you to showcase stories of the companies you invest in.

It was our 12th episode where we interviewed the first Beyond Capital portfolio company, because I’m also really inspired by this new wave of companies. Most of them tend to be B-Corporations, which are businesses that are certified in social, environmental and governance criteria to be meeting standards that are more consistent with social values and not just single bottom line financial return.

That was a challenge and an interest for my co-host and I to learn more about different types of companies; manufacturing or food businesses, and recycling. And a lot of the entrepreneurs and CEO’S we’ve interviewed have been in the U.S. But yes, giving exposure to my portfolio companies is part of what I really thrive on doing.

As movement maker you have to continue to grow. What’s beyond the movement and Beyond Capital for you?

Yes I think movement makers are driven by growth, or the need and the desire to grow. That’s definitely one of my main personal drivers. Putting oneself in a box and saying I must only focus on this (one thing) I don’t think is a good strategy for anybody. Even outside of movements and in the more traditional world of business.

But what has really stood out to me as a movement builder are certain ways that the impact investing movement is not engaging everybody. I think we’re living in a really great time where anybody with a 401k has access to environmental, social, and governance investing, also known as ESG or SRI. But it might not be their first priority. It might not be the thing that they wake up in the morning thinking about because they have a family, job, house, mortgage, or a community around them that isn’t talking about how to integrate their values with their money.

And so the Beyond Capital initiatives that I’ve started focusing on and speaking to a wider audience about is impact investing – that impact investing is a mindset and it’s a tool that can be applied across disciplines. It’s a lifestyle really. The power of tapping into that is something that has been so profound in my life that I really want to share it with others.

I think once you know that you can have alignment with your values, you can’t un-know that. Which is kind of a problem because you start thinking about every area of your life and how aligned or not aligned it may be. We’re all human; I have to get on a plane from time to time. I’m also not 100% convinced that batteries and electric cars are good for the environment so I haven’t fully converted that in my life. I’m still figuring certain things out on my own. But I do know that aligning my money with my values has an immense power.

So along with the podcast, I launched The Conscious Investor, which is an online magazine that sheds light on the world of impact investing. It allows for somebody to learn what is a B-corporation, how to be an impact investor at all different levels with all different means, to learn about companies and learn from other people who are practicing impact investing.

It’s http://www.theconsciousinvestor.co online. It’s a weekly newsletter that comes to your inbox with very little content, intentionally created for somebody to have their weekly dose of impact investing and learn about groups and people are really at the top of their game and that have something to offer a wider community.

And in doing this, I’m hoping to create a knowledge base amongst more than foundations, academics, high net worth individuals, or tech entrepreneurs to become impact investors, and also to recognize superficial impact, which ESG kind of falls into that category. I have it in my portfolio; we call it “do no harm” where you’re excluding tobacco and firearms and other groups.

But to know the difference between that and deep impact which is investing in either what we do at Beyond Capital, or the types of companies that we’re investing in. An example in the U.S. would be investing in businesses that are taking the most thorough approach to how to get food from farm to table or how to recycle plastic wrap, which is notorious for not being able to be recycled and things like that.

That’s the bridge that I’m trying to create for individuals. It was born out of an observation, and often frankly, sitting at dinner parties within certain networks where we’re all sitting there and the conversation around values and money never has come up over the past 10 years. Whereas the impact investment community was doing really interesting things, but there was absolutely no connection point.

So for those who are listening and thinking about building their own movements, think a little differently about how that movement could reach a different audience or how it could get bigger through people who aren’t (already) exposed to it.

I’m a Goopee, so I’m a fan of Gwyneth Paltrow’s lifestyle brand; mostly because it has impacted my family’s health in a very significant way. So I now always have Goop in the back of my mind. But two years ago, I zeroed in on Goop, which nobody else in my industry would have ever thought of as a place to talk about impact investing or, for lack of a better term, detoxifying your portfolio, which is very much in-line with the Goop parlance.

That led to getting to know an editor there, Stacy Lindsey, who has become The Conscious Investor editorial director. The perspective that she brings is being able to speak in a different way about impact investing and create content that can resonate more widely. So I absolutely agree that there are ways to connect people that are not connected already, to some great things that are happening out there.

Episode Resources

The Beyond Capital Podcast: beyondcapitalpodcast.com
The Conscious Investor Online Magazine: theconsciousinvestor.co

Connect With Eva Yazhari

Beyond Capital Website: beyondcapitalfund.org
The Conscious Investor Website: theconsciousinvestor.co
Twitter: com/beyondcapital
Eva Yazhari LinkedIn: linkedin.com/in/eva-yazhari

Listen on Apple Podcasts, Spotify, Pandora or Stitcher.

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How can you align your values and money and invest in social enterprises that truly make an impact?