This interview originally appeared in the Mapping SEA & Indonesia’s 2024 Journey report released during the Indonesia PE-VC Summit 2025.
With Donald Trump returning to the White House as the 47th US president, concerns are mounting over potential shifts in global investment flows, particularly in sustainability and climate-focused ventures. However, Aavishkaar Capital’s Partner, Abhishek Mittal, remains optimistic about the resilience of climate and impact investing, especially in emerging markets like India.
“Contrary to popular view, we believe that investment in sustainability and climate would continue to grow,” said Mittal in an interview for the DealStreetAsia DATA VANTAGE report Mapping SEA & Indonesia’s 2024 Journey.
While geopolitical changes often create uncertainty, he argues that mature venture ecosystems such as India are increasingly insulated from external shocks. “Stable VC ecosystems such as India have evolved to a stage where global geo-political shifts have limited effect,” he said.
Beyond capital structuring, he sees sustainability as an enduring mega-trend that will continue to redefine industries. “We believe that sustainability is a multi-decadal mega-trend that would change the way we manufacture, transport, and consume products and services,” he says. He highlights green manufacturing, sustainable logistics, and traceability solutions as key sectors poised for significant growth despite any policy shifts in the US.
Aavishkaar Capital closed its sixth India fund, Aavishkaar India Fund VI, at $150 million in 2023, marking a 50% increase from its previous funds. It is also Asia’s first 2X Flagship Fund, aligning with the 2X Challenge, a global initiative supporting women-focused businesses. The fund commits to ensuring at least 30% of its portfolio meets 2X criteria—investing in women-led companies, having a strong female workforce, offering products for women, or promoting gender-inclusive policies.
Edited excerpts of the interview with Mittal:
Venture capital investments in Southeast Asia saw a sharp decline of 10.3% in volume and 41.7% in value in 2024, while India has shown relatively stronger resilience in attracting capital. What factors do you think have driven Southeast Asia’s underperformance? How do you expect deal activity in the region to evolve in 2025, particularly with ongoing asset revaluations and macroeconomic uncertainties?
VC activity has generally gone slow across emerging markets because of a host of global factors such as geopolitical issues, increasing interest rates, and resultant slowdown in consumption and somewhat due to overheating of Southeast Asia. Overall, capital will remain elusive and expensive to raise in the near to medium term as these issues stabilise and global interest rates soften.
“We expect equity deal activity to pick up but it has to be complemented with toned-down valuations (and down valuations if necessary).”
We expect equity deal activity to pick up but it has to be complemented with toned-down valuations (and down valuations if necessary) to create opportunities for value-seeking investors. Certain sectors such as ESG-led and climate tech would continue to attract investors. Finally, this could be an opportunity for alternative flexible funding structures such as private credit to support quality businesses with strong fundamentals, positive cash flows, and tangible assets.
What do you see as the primary risk affecting impact investing in emerging markets, particularly in Southeast Asia, in 2025? How does Aavishkaar Capital navigate challenges like regulatory changes, economic uncertainty, or sector-specific hurdles to drive sustainable impact and value creation across its portfolio?
The biggest challenge for emerging markets especially for private capital remains underdeveloped capital markets and reliance on global pools of capital apart from the usual suspects of regulatory overhang or uncertainties. Aavishkaar Capital has a well-diversified pool of LPs and networks of both global and local institutions. On the portfolio side, we remain committed to deep impact and sustainability-led sectors where demand is generally immune to recession such as Financial Services, Agriculture, and Climate. Finally, with ESG First Fund our first credit product, we have the flexibility of offering flexible capital structures to quality high-impact businesses.
“We remain committed to deep impact and sustainability-led sectors.”
How are global geopolitical shifts, including the potential return of a Trump presidency, influencing venture capital flows, cross-border investments, and the growth of startups in emerging markets? What strategies is Aavishkaar Capital implementing to mitigate these risks and seize opportunities to further its impact mission in the region?
Contrary to popular view, we believe that investments in sustainability and climate would continue to grow. Stable VC ecosystems such as India have evolved to a stage where global geo-political shifts have limited impact. As mentioned Aavishkaar has diversified its LP base, offers multiple offerings across capital structure (debt and equity), and works to tap into the local ecosystem to limit the effect of global headwinds when required. In addition, Aavishkaar is a thought leader in bespoke blended finance solutions engineered for very specific mandates – such as circularity, ESG, etc.
“Stable VC ecosystems like India have evolved to a stage where global geo-political shifts have limited effect.”
Renewable energy and sustainable agriculture have been key focus areas within the ESG investment landscape in Southeast Asia. From Aavishkaar Capital’s perspective, what underexplored sectors in the region hold significant untapped potential and could emerge as the next major opportunities for impactful investment?
We believe that sustainability is a multi-decadal mega trend that would change the way we manufacture, transport, and consume products and services. Apart from the sectors mentioned above, opportunities in green manufacturing, sustainable logistics & packaging, traceability solutions etc. would gain significantly from this shift.
Our data indicates that early-stage valuations are showing signs of stabilisation, while late-stage companies continue to face significant downward pressure. From Aavishkaar Capital’s perspective, what key factors do you believe will influence these valuation trends in 2025? Do you foresee a potential recovery in late-stage valuations, particularly in sectors aligned with your impact-driven investment focus?
This is also a function of volume and size of transactions. Late-stage companies need qualified institutional investors who are more sophisticated and fewer, compared with early-stage companies that are increasingly getting backed by angels and smaller VC funds.
Pressure on late-stage valuations will continue for the time being
Having said that, pressure on late-stage valuations will continue for the time being as the investor has to factor in the risk of longer times to exit; in line with the uncertainty. The avenues for liquidity events in late-stage companies are few and far between. But for more evolved markets such as India, the impact on late-stage valuations is expected to be a lot less if the path to a liquidity event such as an IPO is established and visible.
