Omidyar Network is the philanthropic investment entity founded by eBay founder Pierre Omidyar and his wife Pam. The formation of Omidyar Network was inspired by Pierre’s experience at eBay, which he co-founded in 1995 based on his beliefs in the power of markets. Those principles of access, connection, and ownership influenced the Omidyars’ approach to philanthropy. The investment firm is looking at backing such models in India as "creating markeplaces", which can scale in size like eBay, and also have a social impact. It is about the problem that the business is trying to solve and the fund accordingly makes investments in for-profit companies as well as provides grants to nonprofit organizations, with social impact being the unifying criterion for investment. The network plans to invest between $100-$200 million in India in the next 3-4 years, says Jayant Sinha, Managing Director, Omidyar Network India Advisors, in an interview to VCCircle. Excerpts:
How do you balance the social investing thesis and the profit aspect?
We very much look at the problems we are trying to solve. Some problems are best solved by for profit businesses and some problems are best solved by NGOs. So depending on the kind of organization that we are working with, we know whether we should be making an equity investment like a regular venture capitalist would do or we need to make a grant. For instance, we just gave a grant of $3 million to Janagraaha, which we think is doing a phenomenal job in citizen empowerment and enabling citizens to work more effectively with the government. Then we invested about $3.75 million equity into D. Light , because it is a business having a huge social impact in distributing solar lantern lamps in substituting kerosene lights. So it’s a classic venture capital investments, and Janagraaha is a classic not- for profit investment.
What are your return expectations for your for- profit investments?
For our for-profit equity investments, the investments are just like a regular venture capital does, so our return expectations are just like that of a regular venture capitalist. We don’t try to subsidise for profit businesses, that’s not the objective. The best way to support for profit business is a regular venture capital investment. Which means there is a need for the commercial discipline that is required for them to be profitable and scale extremely well.
What else you offer apart from capital?
One of the very important part of our model is that we are “value-add” investors. We assist entrepreneurs on governance, organisational design, strategy etc. Also because we don’t have a reason to exit our companies early, our investment horizon is like that of Warren Buffet, which is very long. So, we can stay in a company as long as it has a social impact.
You mean you don’t have constraints of typical venture funds. When would you typically exit an enterprise?
Yes. We are not a (VC) fund as such. So we are not driven by the typical fund structures of getting into a company and exiting it. This is not our goal. Our goal is social impact.
Where does the social investing fit in to the venture capital ecosystem?
You can have social impact with for –profit business and you can have social impact with not- for profit businesses. If you look at what Peirre did with Ebay, it is a company which created a market place with key elements of transparency and accessibility -- where everyone had equal access to information, opportunity, and tools to pursue their goals. Today, eBay enables more than 80 million buyers and sellers worldwide to connect and prosper. This has huge social impact. eBay's vast scale and accelerating social impact have demonstrated that business could also be an effective tool for making the world a better place.
So, are you replicating the Ebay model in India?
Yes, eBay is already in India, but we are looking at such models. Quikr is a good example of that. We have to create market places, because we found that when you create market places, one can create huge social impact.
What sectors are you looking at in India?
We are interested in financial inclusion, property rights, base of pyramid entrepreneurship, consumer internet and technology for consumers. There’s a lot of dealflow right now in the education space, a lot of innovation is happening in cleantech.
How much of you have invested till now? How much are you looking to invest and what share would go to for profit and not for profit?
Our investments in India are over $60 million including both for profit and non-profit investments. We plan to invest upto $200 million in the next 4-5 years.
As for profit and not for profit, globally, the share has been 50:50. In India, our investments would be more towards “for- profit”, simply because there are not many NGOs to absorb that kind of capital.
What is Pierre Omidyar’s vision for India?
We are very excited about India. Pierre has made a major commitment to India and that has grown very quickly in India. We already have an on- the- ground presence in India which is growing.
How do you measure social impact and ensure that the companies will have the same?
We measure social impact by looking at reach and engagement. Reach is how many people this company is going to reach and engagement is to what level it will make difference in the lives of these people. When we select companies, we know from their inherent business model and value proposition that they will have a social impact. Then it’s just a matter of scaling the business and then the faster it grows, the more the social impact it has. It’s very important for us to pick businesses which will have social impact as an inherent part of their business model.
We have other funds also targeting the social VC investing space. Also, recently Vinod Khosla announced his intent of investing into sustainable business models. Why this rush to the space?
I met with Mr Vinod Khosla recently. He is very interested in working with us as well. The fact is that people are excited about what entrepreneurial sector can do for India and everybody is extremely encouraged by what has happened to microfinance, which has ensured both profitability and social impact, also market capitalization and wealth creation. This is a great model which can be replicated in other businesses, where we have for- profit businesses to improve people’s lives.