In a recent LiveMint column, Pierre Omidyar, Founder of the Omidyar Network, discusses India’s potential to become an ‘inclusive innovation hub,’ where social entrepreneurship and social investment allow increasing parts of the population to access the products and services they need to live better lives. To date, the Omidyar Network has invested $70 million into both for-profit and non-profit companies in India and plans to invest another $100 – $200 million by 2016.
We believe that India will be the world’s inclusive innovation hub—a place where people can access affordable products and services, actively participate in their communities, and build a better life for themselves and their families
Pierre Omidyar, Founding Partner, Omidyar Network
Philanthropy around the world is changing. Philanthropists are younger, they want to see their resources put to use during their lifetime to great effect, and they are eager to bring their business skills to bear on some of the world’s most difficult problems.
At Omidyar Network (ON), we are in search of solutions that provide opportunities for people to improve their lives. We approach philanthropy with an entrepreneur’s determination and an investor’s discipline. This means that the investments ON pursues must not only have the potential to create massive social impact, but they must also be financially sound and sustainable—and in the case of our for-profit investments, profitable. It’s important to note here that many people have questioned ON’s decision to invest in for-profit companies as part of our philanthropic strategy. My own experience with eBay Inc. (the company I founded in 1995)—as well as ON’s work with dozens of for-profit companies—has demonstrated many times that there is not necessarily a trade-off required between financial and social return.
Beyond financial capital, ON also takes an investor’s approach by providing its portfolio companies with the resources needed to succeed—especially in the areas of strategy, governance and organization development. Where we’re different from a traditional investor, however, is that ON is willing to invest patiently for those catalytic opportunities to deliver long-term impact.
We believe that India will be the world’s inclusive innovation hub—a place where people can access affordable products and services, actively participate in their communities, and build a better life for themselves and their families. India has a thriving entrepreneurial business community confronting massive social challenges such as extreme poverty, malnutrition and illiteracy. In Mumbai, top investment bankers share the sidewalk with beggars. These paradoxes—where one group of society is inspired to help change the drastic inequality it sees on a daily basis—are leading to a new generation of social innovators. Increasingly, these advances will not only impact India, but also be shared with the rest of the developing world.
Across the world and in India, ON seeks to support enterprises that will achieve large-scale social impact. Because this goal can be achieved by both businesses and non-governmental organizations (NGOs), ON invests in both for-profit and non-profit organizations. To date, we’ve invested more than $70 million (Rs.319 crore) in India and look to invest another $100-200 million over the next five years. In many cases, technology is an enabling factor that helps these organizations (or their products or services) to reach large groups of people. ON’s investments share three qualities: (1) demonstrated potential for creating positive social impact for hundreds of thousands, if not millions, of people; (2) a sound business or operating model that leads to sustainability; and, (3) catalytic opportunities with organizations boasting strong leadership teams.
Our investment in d.light design, a for-profit company that makes solar lanterns, exemplifies this approach. Widely distributed in India (and now available in Africa), the benefits of solar lanterns are many: they save money in terms of total cost of ownership; are not prone to spills or fire; allow users to study, work, and make use of evening hours; reduce India’s carbon footprint as well as the government’s fuel subsidies; and improve health by reducing indoor smoke and particulates.
A large-scale positive impact can also be achieved by connecting millions of people through technology platforms that enable the exchange of information and goods or services. These opportunities enable cancer patients to post information and connect with each other about how to cope with various treatments, citizens to connect with each other and share information that holds government leaders accountable and prevents corruption, and provide public access to free information from experts through services such as Wikipedia. People’s lives are also improved through opportunities that enable ownership and increase dignity and self-worth. For instance, through the work of organizations such as Landesa (formerly the Rural Development Institute), small farmers can get secure and transferable property rights to their land.
The second principle that we follow is to focus our support on sustainable enterprises—for-profit companies and NGOs—that have a model that allows them to scale their efforts over time, in a responsible way. Sustainable financial returns for a for-profit company imply that the company is providing a valuable product or service to its customers. Sustainable financial returns are essential for such companies to attract high-quality talent and to invest profits back into the company that fuel growth. As a result, companies can scale in a sustainable manner, which in turn drives significant social impact. For NGOs, we believe that finding paths to earned income and generating donations from many diverse sources can help free an organization and allow its staff to spend more time focusing on the mission.
We also hope to have a catalytic effect with our investments. This implies a focus on investments or grants at organizational inflection points, when financial resources and professional expertise will have the most impact in helping an enterprise grow. Typically, this means companies with a proven model and demonstration of social impact, supported by a strong management team. Success is judged by how many people’s lives each organization is impacting and to what extent. This evaluation system is imperfect, but we believe it’s a good indicator of the type of impact we want to see in the world.
Our hope is that this type of impact investing can play an important role in India’s development by supporting innovative organizations that foster economic, political and social advancement for all Indians. Many of these successful solutions are being designed and applied by India’s most talented entrepreneurs. This is inclusive innovation—not a state-driven or top-down approach, but a market-based approach that begins with entrepreneurship and experimentation. We are finding such inclusive innovation in many sectors such as housing, financial services, health and medical care, clean energy, education, and mobile technologies. What is certain is that India, and indeed the world, stands to benefit on a scale we may have never thought possible should the full force of India’s talent be unleashed. ON is humbled and grateful to be one of the many impact investors participating in the revolution.