Disruptive Innovation and Innosight Ventures

Daniel Epstein September 17, 2009

Our first foray into mapping the impact investor at SoCap space features Elnor Rozenrot, a Venture Director of Innosight Ventures. Innosight Ventures is a unique venture capital firm focused on creating or reshaping its own opportunities for investment in two ways: by spotting opportunities that others can’t see and shaping these opportunities, and by doing well by doing good.

Video Interview Table of Contents:

  1. What does Innosight Ventures do? (0:01-3:44)
  2. Why does Innosight Ventures invest in social ventures instead of traditional for-profits? (3:45-5:15)
  3. What key questions do you ask an entrepreneur before investing in his/her venture? (5:16-7:24)
  4. How does Innosight create sizable returns with very small initial investments? (7:25-11:08)
  5. What’s the best investment Innosight Ventures has ever made? (11:09-14:10)
  6. What is Innosight Ventures doing to pave the way for mainstream investors and entrepreneurs to serve overshot/BoP customers? (14:11 to 16:30)

Innosight Ventures Profile. Launched in 2001, Innosight Ventures is currentlyheadquartered in Singapore, with a presence in Mumbai and Baltimore. Innosight Ventures invests based on the principles of Disruptive Innovation.Theory as outlined by its founder Professor Clayton Chrstenson in The Innovator’s Dilemma. This theory holds that companies innovate more quickly than their customers’ needs change and that many of these customers either don’t need or can’t afford to keep up with new products and services. What many of these customers need instead is access to products and services that are simpler, cheaper, and more convenient. Innosight Ventures targets these overshot markets, investing in affordable technologies that enable its customers to get a job done (called a “jobs-to-be-done approach”).

In Action. What does this look like on the ground? One of the shining stars of Innosight Ventures’ Portolio is its Village Laundry Service (VLS). VLS provides a vetted, low-income Indian washerman, called a dhobi, access to a laundry machine (disruptive innovation). The laundry machine enables him to vastly increase the number of clothes he can wash each day and dramatically improve the quality of his services, effectively doubling to quadrupling his income (job to be done). Thanks to the machine, he can lower his price from Rs. 36 per kilo of clothing to Rs. 30 per kilo, making his services more affordable to his customers. To top it all off, the venture takes 2 days to produce profits and Innosight Ventures walks home with 40% of them. Not too shabby. You can hear Elnor describe the Village Laundry Service in more detail in his response to Question 1.

Investment Range. Conventional wisdom holds that generating substantial returns requires initial investments of millions to hundreds of millions of dollars to produce prototypes. Innosight Ventures structures its ventures to achieve success with initial investments of $250,000 to create initial revenues to $1 million to create initial profits. Listen to Elnor explain how in his response to Question 4.
Portfolio. Innosight Ventures’ portfolio includes investments in ventures like Guaranteach (a web-based math tutor that adapts to students’ preferences), Peepal Finance (a finance company filling the funding gap between microfinance institutions and traditional banks), Razor Rave (kiosks that provide grooming services for men) and Innoway (a company offering high quality products to low-income consumers), The Innosight Ventures website includes a video library of some of the firm’s best portfolio companies. Elnor discusses two of Innosight Ventures’ best investments in his response to Question 5.
Elnor Rozenrot’s Bio. Elnor Rozenrot is a Venture Director of Innosight Ventures and is based in Baltimore. He focuses on the incubation and early-stage businesses development of Innosight Ventures’ portfolio companies and is one of these early-stage portfolio companies in the US. He has lived and worked in the US and in Israel, serving as an Owner’s Agent at a telecommunications company, and leading two IT companies in Israel. He received a Bachelors Degree in Law from the Academic College of Law in Tel Aviv and an MBA from the Tuck School of Business at Dartmouth, where he was awarded the Arnold F. Adams Jr. Entrepreneurship Award For Excellence In Entrepreneurship.

Many thanks to Elnor Rozenrot for taking the time to talk to us about the Innosight Ventures! Learn more about what they do at www.innosightventures.com.

written by: Teju Ravilochan (Unreasonable Institute)

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