Miami, US: India is set to get its first philanthropic investment firm. California-based Omidyar Network is entering the country with plans to fund both for-profit and non-profit entities.
Started by eBay Inc. founder Pierre Omidyar and his wife Pam in 2004, the firm has so far committed nearly $270 million (around Rs1,275 crore) in for-profit and not-for-profit organizations across the world. Working on the principle of positive social impact, Omidyar invests in areas related to microfinance, government transparency and social media, among others.
Equal emphasis: Bannick says Omidyar plans to fund both for-profit and non-profit entities.
In India, the firm has so far made direct investment in Bangalore-based Comat Technologies Pvt. Ltd, which provides computer-based job training, financial services and digitalized government documents in rural areas. Its other investments with operations in India include SONG Growth Co. (an investment fund), Rural Development Institute and Unitus Inc.
In an interview with Mint, managing partner Matt Bannick said that once Omidyar Network appoints a country head for India, it would look at investing in agriculture, energy, water, healthcare and education. Edited excerpts:
What’s the idea behind funding both for-profit and non-profit firms?
We don’t see ourselves as a social venture firm. We have come with the idea of having a positive impact on the society. A lot of people assume that the only way to do it is by giving away money. We see business as a vehicle having positive social impact. We also, by the way, recognize it’s the entrepreneur who fills a particular void in the society and profit is the most appropriate way to it. Therefore, we have two cheque books—one for-profit cheque book and another non-profit cheque book.
What is Omidyar’s general route of funding?
We can write a grant or a PRI (programme-related investment) rather than doing a deal that’s completely VC (venture capital). We, at times, do both as well. Can we give VC deal for a company that has huge social impact? Absolutely! We also expect different levels of returns based on particular models and sometimes we mix them.
What kind of firms will interest Omidyar in India?
We look for firms that are experiencing success, but are not yet large organizations. Organizations that are pretty big and rolling don’t really need our venture mentality. What we do is to look at firms that we think have massive social impact, and we will invest in them significantly.
What are your India plans once you enter the country formally?
We have looked at entrepreneurship in India, and we are interested in organizations that serve the bottom of the pyramid. We are still in early days in India and are searching for a country manager. We may or may not directly invest in Indian microfinance institutions. We will invest in companies serving the bottom of pyramid, but the deals would be just a handful a year. We are not talking about 50 investments a year. We will probably have two-four deals annually.
How will your portfolio look like in India? What will be the division between investments in for-profit and not-for-profit organizations?
We will have both, and our general rule of thumb is 50:50. The ratio is, however, strictly influenced by market conditions. If we find in any given year 60:40, we are totally fine with it. If it is 80:20, then we will step back and ask why.
What kind of returns can be expected particularly when your portfolio will be divided between for-profit and not-for-profit firms?
It totally depends, I guess it can vary from zero to infinity. We will give grants and also do deals of significant returns. I feel the hardest ones are the ones in the middle. The challenge is when you start saying that we don’t want so much financial returns. Then it becomes challenging to assess are you thinking it’s a business or it’s a charity. If something has high social impact and we are completely or highly confident, then we may lose our constraints on returns.
Which sectors will attract you in India and what would be the investment peg?
We have not decided on any figures yet, but it would be more than a few million dollars a year, certainly. Agriculture, energy, water, healthcare, education, mobile technology would be interesting.