Rainmatter Foundation: When bias is good

Basically, Kamath wants a little more forest, everywhere. It is with that in mind that in early January 2021 the founder and CEO of Zerodha, India’s largest stock broker, had made an announcement about launching the Rainmatter Foundation. A $100 million [around Rs 750 crore] commitment to focus on climate change at the intersection of livelihoods, afforestation, environmental conservation and rejuvenation. “What’s the point of fintech without a planet to live on?” Kamath, 42, had tweeted at the time. Sixteen months later, a lot of ground has been covered, and they have their thesis figured out.

Even as we speak at the Bengaluru office of Zerodha in early May, this journalist finds that the city that had been her home for five years until 2018 has become warmer, with temperatures hovering around 33 to 34 degree Celsius, according to AccuWeather. Just a week later, however, India’s technology capital would go on to experience heavy rainfall and thunderstorms, with the maximum temperature dipping to as low as 24 degree Celsius. Around the same time, as cyclonic storm Asani would form in the Bay of Bengal and cause rainfall in West Bengal, Andhra Pradesh and Odisha, the India Meteorological Department (IMD) would warn of a fresh heatwave spell in Delhi, with temperatures expected to soar over 44 degree Celsius.

The damaging effects of climate change are already around us everywhere, and people are scrambling to adapt their lives. So much of this damage is “irreversible”, says Kailash Nadh, chief technology officer of Zerodha, stressing on their intent behind working toward solutions to combat the effects of climate change. A major area of focus is to look at climate at the intersection of livelihoods, because Kamath and Nadh believe that just reducing carbon footprint or re-greening or making other such efforts in silos is not going to be enough. “The human cost of climate change is going to be huge. You need to integrate people into these processes,” Nadh says.

Their efforts run on two wheels. One is through grants and fellowships to non-profits and individuals, which is primarily the ambit of the Foundation. The other is investments in for-profit companies through Rainmatter Climate.

“The thought behind for-profit investments is that economic incentives also lead to people solving large problems,” says Kamath. “An idea like, ‘Is there a way to grow a tree fast?’ is more likely to happen in the for-profit space than on the non-profit side.” Their earliest investments were in climate tech startups Blue Sky Analytics, which collects and processes environmental data that can be used by governments and companies to help deal with situations arising out of climate change; and in Terra, an online climate school for those wanting to be part of the climate solution.

All profits earned through these investments go back to the Foundation. Rainmatter, in 2016, had started as a fintech fund, and climate was added to the investment mix about three years ago. Both non-profit grants and for-profit investments in climate are listed together under the Rainmatter Foundation website.

The intent behind the Foundation goes beyond just making philanthropy or Corporate Social Responsibility (CSR) outlays to actually solve problems, says Sameer Shisodia, CEO, Rainmatter Foundation, talking about their attempt to adopt a “climate bias” to catalyse an entire ecosystem to implement solutions in a more permanent way. This also means that they take a long-term view, and support a project for at least three years.

“Say, as an NGO, you solve one part of the problem, but you will not have stickiness if the rest of the ecosystem is missing. So you need both formal and informal institutions, you need government, you need entrepreneurs,” Shisodia explains, reiterating philanthropist Rohini Nilekani’s approach of working together with samaaj (civil society), sarkaar (government) and bazaar (business). “We do not need as much innovation as we need better adoption, ecosystem-building and collaboration to help these efforts become mainstream,” says Shisodia.

An engineer by qualification, Shisodia left his long career in the technology industry over a decade ago. He moved to Coorg to experiment with sustainable farming, farming collectives, “and his personal passion, rejuvenating soil and forests”, according to a blog on the Rainmatter Foundation website.

Till date, Rainmatter has made 30 non-profit grants, and has investments in about 11 startups. The cheque sizes for investments, especially first cheques, are typically small and between Rs 1 crore and  Rs 5 crore, Kamath says. Shisodia adds that non-profit grants can be anywhere between “Rs 5 lakh for three years and double-digit crores”, depending on the organisation, the project and the requirement.

Even though the Foundation was officially launched in 2021, the seeds for Rainmatter were sown around 2016-17, when Zerodha, which was a profitable startup with no external funding, started “generating more cash than the business needed”, says Kamath.

So, along with Nadh and the core team at Zerodha, he started looking at ways to give back to society. They started engaging with non-profits and evaluating funding proposals part-time, before they realised they had zero core-competency for it. “Making money is far easier than giving back, and the skills required are very different,” says Kamath, who, along with his brother Nikhil [co-founder of Zerodha], is ranked 86 in the Forbes India Rich List 2021, with a net worth of $2.59 billion, up from rank 90 in 2020 and a net worth of $1.55 billion.

Kamath’s interest in working more meaningfully in the climate action space piqued when he met Malvikaa Solanki, who had revived a five-acre barren land on the edge of Bandipur Tiger Reserve in Karnataka into a thriving and self-sufficient farmland with over 5,000 trees and 600 species of flora, which was meeting 70 percent of their food needs.

After one meeting with Solanki at her farm, Kamath decided to support her in scaling up her efforts to 1,000, even 2,000 acres. But Solanki suggested they pilot it on a 100-acre plot of land to see what is working and what is not. “For me, it was about supporting initiatives like ours to do deeper work and making sure our efforts are sustainble, and not just about scaling up.” This idea eventually led Zerodha to support The 1000 Tree Project through a grant of Rs 2.7 crore in 2020, months before Rainmatter was launched.

Implemented through Solanki’s NGO swaYYam, the project is working to turn a degraded landscape into a fertile terrain with tree-based systems and sustainable water resource management, and secure livelihoods of farmers through an agroforestry approach.

Solanki remembers those early days of multiple Zoom meetings attended by every core member of the Zerodha founding team, and Kamath himself. “They did not have a detailed level of understanding of climate change, but I was overwhelmed with how passionate they were to support. They took time out to have those discussions, get involved in the process, ask the right questions, do their research, and build capabilities.

The Rainmatter Foundation was formed at a time when civil society organisations were not only reeling under the pressures caused by the Covid-19 pandemic, but also the Foreign Contribution (Regulation) Amendment [FCRA] Bill, 2020, which tightened the noose around the social sector with respect to compliance processes and access to foreign funds.

A non-profit should be at least three years old to be eligible for an FCRA certificate and receive foreign funding. The role of domestic funders becomes even more crucial during such times, particularly to provide stable support that is not averse to backing younger organisations, says Shashank Srinivasan, founder of Technology for Wildlife (TfW), a Goa-based non-profit registered in 2021, which helps organisations and individuals amplify conservation efforts through use of technology like geospatial analysis, artificial intelligence (AI) and robots.

Srinivasan first approached Rainmatter Foundation in January last year with a proposal to fund a single project: A clearance mapper platform that would make it easier for people to access data on environmental clearances provided by the government to development projects across the country. “But it was lovely to hear that they wanted to fund all our work for three years, and not just one project. This kind of unrestricted funding, which requires a lot of trust, is actually one of the most efficient ways to work,” he says, explaining that stable funding of this nature helps him focus on all projects with the same level of intensity instead of just one, while also taking care of essential expenses like payroll and on-field equipment for staff. “NGOs with fluctuating funding might not have this kind of stability.”

Neha Jain also attests to how thoroughly the team does their research and due diligence. She is the founder of Zerocircle, a for-profit company in Mumbai that uses seaweed to create bio-alternatives to plastic, and received an investment of $300,000 (around Rs 2.19 crore) from Rainmatter Climate last year. Research and Development (R&D) is a relatively new space for Rainmatter and bioplastics is a buzzword, Jain says, but the market is a grey area that has developed a bad reputation.

So the folks at Rainmatter Climate reached out to their networks and did their research.

“To understand exactly what we were doing, they would send across a lot of research papers and ask us to decode how we fit or did not fit into those categories. I used to take a whole week to break down the entire research paper, and they would take two weeks just to go through it and understand,” says Jain. “And we never spoke numbers in the first few meetings. It was always about building the right product, rather than a product that will immediately scale.” She says that even after they invest, Rainmatter has a curious, but non-interfering approach. “Once they have figured out they are backing the right person, they have a hands-off approach.”

Nadh says they are chasing impact and not profits. And even though Zerodha is a tech company, believing that technology can solve climate issues without grassroots efforts or ecosystem building is “delusional”. Kamath adds that such climate-related efforts take time to show meaningful impact, and outcomes should be measured in time and with patience, not by setting targets or making projections. That said, he adds that “things have to happen at scale, and it has to be organic”.

The team ensures this by making sure that impact is measured not just with personal stories and anecdotes, but also data. “There is active effort within the team to figure out a scientific way to collect data. So one of the things we do want from organisations we support is data. Our hope is that these quantifiable metrics will help other projects too,” says Nadh.

Shashi Kumar, founder and CEO of organic milk company Akshayakalpa, says that objectively defining metrics for his work and measuring them helps backers like Rainmatter—who come from a tech and financial services background—understand and analyse his business impact in a better manner.

Kumar says while he used dairy as a starting point, his company, based in Tiptur in Karnataka, is doing work on soil management and tree integration at the farm level, backyard poultry, fruits and vegetables and mushroom cultivation, and helping farmers diversify their farm produce. They also create market linkages for this produce to reduce risks for the farmers. “This is giving more income streams to the farmers,” he says.

Akshayakalpa has linked 650 small farms to the market and created a pipeline for 1,500 farms. Out of those 650 farms, 218 are fully managed by women. In his business, Kumar explains, quantifiable data looks like measuring average yield of cows in Akshayakalpa farms versus the national average, or how coconut trees in the farms are yielding more nuts per annum, or how many farmer livelihoods they have enabled, how many of those farmers are women, and how many of those women have money transferred directly to their bank accounts. “They might not appreciate subjectivity, but data-based evidence of impact speaks to them,” Kumar says. Rainmatter Climate has invested Rs 5 crore in Akshayakalpa, Kumar says, and is also participating in the ongoing Series B funding round.

Investee companies—both young and seasoned—talk about the business expertise at Zerodha that they get to access through Rainmatter Climate.

For instance, having them as investors matters to the experienced entrepreneurs at SolarSquare because “Nithin and his team are solid operators and advisors from whom we could get some strategic advice and benefit”, says Shreya Mishra, CEO of residential solar at SolarSquare, which is in the business of residential rooftop solar panels. “Rainmatter has the best interests of the founder in mind and is not like traditional VCs (venture capitalists). Their capital is sensible and patient, which helps in building an enduring business and not just the next best valuation to get an exit.”

For first-time entrepreneur Mathew Samuel, who co-founded SundayGrids in 2020, it is about trust and confidence in aspiring youngsters. SundayGrids provides a digital solar platform where people can reserve solar over the internet for energy credits to save up on power bills, instead of installing panels on the rooftop. The 25-year-old says the team at Rainmatter Climate gave him time and space to figure out compliance and also connected him to people who might help. “This was even before they funded us, when they could have been non-committal,” he says. SundayGrids has raised Rs 2.7 crore seed investment from Rainmatter Climate.

The non-profit grantees Forbes India spoke with also say that Rainmatter Foundation helps them build networks and connections.

The Watershed Support Services and Activities Network (Wassan) has been encouraging natural farming practices in areas that do not have assured irrigation by working with farmers, a network of civil society organisations, and governments since 1996. Their association with Rainmatter Foundation, which started with a grant in January, helped them realise that while working with the government is important, it is equally important to get other stakeholders to come on board.

“The advantage of Rainmatter is that they connected us with a large number of ecosystem actors with credit, innovation and technology backgrounds. That kind of access is lacking with NGOs,” says A Ravindra, director, Wassan. As NGOs, you are used to thinking in a certain way, which can become a bottleneck to scale, he explains. “At Rainmatter, people are not from non-profit backgrounds. Their perspective helps us sometimes rethink our own logic, makes us more robust, and brings in different ways of thinking about scale.”

Jigyasa Labroo agrees. “They are able to see intersectionality and leverage it. They are keen for organisations collaborating with each other in climate action,” says the founder of Slam Out Loud, an NGO that uses art-based curriculums to help children from underserved communities find their voice through creative expressions. Labroo has received a grant from the Rainmatter Foundation this year to pilot an arts-based climate action curriculum into her ongoing programmes to help children understand and engage with the issues related to climate change.

Shisodia says one of Rainmatter’s focus areas at present is to bring together a coalition of like-minded people—like scientists, researchers, think tanks, non-profits, innovators, investors, youth networks, legislators—to build knowledge banks and help define a systems approach to climate response. “A larger consensus needs to emerge around what is the climate problem, and what are the core levers around which to solve it. If this gets framed in the right way with different people doing their bit efficiently, then it won’t even matter if Rainmatter is there or not.”

Kamath says that he has decided to give back a lot more of his wealth, perhaps even as high as 90 percent in the future, because incrementally, there is no better use of the additional money his business is generating. “We have started with $100 million, but as and when we find scalable opportunities to create impact, we will deploy more.”