Omidyar Network Releases Report on Investing in Emerging Markets

frontiercapitalPhilanthropic investment firm Omidyar Network – established in 2004 by eBay founder Pierre Omidyar and his wife Pam – released a report laying out how early stage risk capital in emerging markets (or frontier capital) can be an effective tool for investors to achieve financial returns and social impact.

The report “Frontier Capital: Early Stage Investing for Financial Returns and Social Impact in Emerging Markets“, draws from interviews with investors, data analysis, and a meta-analysis of existing research and highlights opportunities available to investors today, giving insight into which of those opportunities is best for particular portfolios.

The frontier capital opportunity focuses on companies developing products and services for people who earn roughly $2 to $8 per day. These people fall between the very bottom of the economic pyramid—where many impact investors currently focus—and the existing middle class. This means they have greater purchasing power and a steadier income, but still greatly benefit from products and services that improve their lives.

The document outlines three strategies for venture capital firms, impact investors, and individuals who want to align their investing with their social values.
1. The Frontier strategy, which is effective with traditional VC financing tools and invests in businesses that directly target low- to lower-middle-income populations. The report surfaces two factors in particular that are correlated with scaling quickly and profitably: a “mixed-income” model that allows the company to serve both middle- and lower-income populations and an asset light business model. The most prominent sectors in this category are financial technology (fintech), education technology (edtech), and consumer, Internet and mobile.
2. The Frontier Plus strategy for investors with more patience and risk tolerance because companies in this category are more asset intensive, target only poorer income segments, or operate in countries with less-developed capital markets. Companies in this category such as Rangsutra (consumer crafts), Servals Automation (sustainable rural energy products), Shree Kamdhenu Electronics (electronic milk collection services), and RuralShores (rural business process outsourcing) produced 5x or greater returns to investors.
3. The Replicate and Adapt strategy, which reflects where the bulk of existing VC funding in emerging markets already flows, which focuses on companies replicating business models that have been proven elsewhere and adapting them to an emerging market context.

The entire report is available on Omidyar Network’s website here.

FinSMEs

07/10/2015

What’s Omidyar Network

Firm

Omidyar Network

Description

Established in 20014 by Pam and Pierre Omidyar, Omidyar Network is a philanthropic investment firm which aims to create opportunity for people to improve their lives by investing in market-based efforts that catalyze economic and social change. It operates both a Limited Liability Company (LLC) and a 501(c)(3) entity, allowing us to make investments in for-profit companies as well as grants to nonprofit organizations.

Omidyar Network does not accept unsolicited proposals while proactively seeking new investments based on investment area strategies and typically sourcing deals from within their network of partners and contacts.

Amount of Funding

Not given

Areas/Sectors of Interest

Consumer Internet & Mobile—enabling people to connect with others, make more informed decisions, access products and services efficiently, express themselves, and take action on what matters to them

Entrepreneurship—investing in high-growth entrepreneurs that provide low-cost products and services to underserved populations and spur economic growth • Financial Inclusion—extending access to high-quality, affordable financial services to the poor

Governance & Citizen Engagement—encouraging accountability and effectiveness of government by increasing people’s access to credible information about government activities and money in politics

Property Rights—fostering economic security, identity, and wealth creation by helping people establish, formalize, and leverage property rights

Investments in chronological order

http://www.finsmes.com/tag/omidyar-network

Team

Pierre Omidyar, Co-Founder and Founding Partner

Pam Omidyar, Co-Founder

Matt Bannick, Managing Partner

Offices

Redwood City, California, USA

Washington DC, USA

Johannesburg, South Africa

London, UK

Mumbai, India

Web Site

https://www.omidyar.com/

Social presence

https://twitter.com/OmidyarNetwork

https://www.facebook.com/OmidyarNetwork

http://www.linkedin.com/company/22806

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