The Global Innovation Fund: Addressing the Pioneer Gap in Impact Investing

The Global Innovation Fund is a London-based non-profit fund with a unique mandate: It has $200 million to invest – either in the form of grants or as risk capital investments – in social innovations that have the potential to improve the lives of millions of people in the developing world.

“Our mandate is extraordinarily wide: any country, any sector, almost any financial instrument and any amount of money from $50,000 to $15 million,” Nishant Lalwani, Senior Vice President at the Global Innovation Fund, explained to OnFrontiers during a recent interview.

That original $200 million was raised in the form of grant capital from the governments of the U.S., U.K., Sweden and Australia, as well as the Omidyar Network, a “philanthropic investment firm” established by eBay founder Pierre Omidyar and his wife. Since the initial funding won’t have to be repaid to the governments, profits from equity and debt deals will be recycled back into the system in the form of additional grants and investments.

So it’s focus is impact investing and social entrepreneurship, with the flexibility of venture capitalism. Lalwani sat down with OnFrontiers to explain how the fund works. Read excerpts from the interview below.

What makes the Global Innovation Fund different from traditional impact investing?

We are trying to address an overlapping, but different segment of the market. Which is investments that perhaps do not create the financial returns that the impact investment segment might need. Or that create the returns over a longer period. Or have more risk, and more social rewards, associated with them.

We are hoping to address the pioneer gap in impact investing, and social enterprise in general, where we can fund things that are innovative. We can take some of the risk that other, for-profit funds, might not be able to take. By doing so, we hope to get more radical and high impact social returns, too.

How do you prioritize financial returns versus social impact?

We prioritize creating social impact at scale amongst the poor in developing countries –which we define as those earning less than $5 a day, with a special focus on those earning less than $2.

How do you decide which financial instruments to use for deals?

We try to be responsive to innovator needs in terms of what instruments we provide, rather than just saying we only do equity or we just do grants. Furthermore, we look at the instruments that we think are most likely to incentivize the innovators to create effective social impact at scale.

For example, ‘Educate!’, a skills-based educational program in Uganda, came to us and said, ‘We want to revolutionize entrepreneurship training in East Africa. We are a program in Uganda, we are a non-profit, we want grant funding.’ Their pitch made sense because they can scale since they work directly with government. So we funded them via a grant.

Another one of our investments is Segovia – a software technology platform that aims to “end extreme poverty by making it faster, safer and easier to pay anyone, anywhere in the emerging markets.” They are a for-profit entity with other co-investors. So there, an equity investment made sense.

A third example is SafeBoda in Uganda. They are a kind of Uber-like network of motorcycle drivers. They give their drivers road safety and driving training and provide helmets for both passengers and drivers. Traffic accidents are the third biggest killer in Africa – after HIV and AIDS. So it is an example of an innovative solution to a tremendous problem.

In that instance, we structured a convertible note investment of approximately $230,000, which is an early-stage risk capital instrument. It’s a loan that can convert to equity if the company does well and raises money in the future.

How do you decide which projects to fund?

First, we have a terrific investment team that reads every single proposal submitted to us, and sources deals from promising partners too. That team has backgrounds in grantmaking, for-profit investing and impact evaluation – we have team members who used to work in places such as Bain Capital, the World Bank, The Bill & Melinda Gates Foundation, UNDP, Google and the Government of Moldova. These team members evaluate and execute deals.

We also get multiple external reviews on any given opportunity – for example, local experts in a given geography, or technical leaders within a given field – and those reviews feed into our due diligence and form a very important part of our process. We then find generalists with expertise in funding and evaluating development innovations, and whom we think could be suitable to opine on those deals as part of a “decision panel.”

The decision panel is made up of 3-5 people, with the majority being members brought in from outside of GIF. We’ve had a whole range of very talented leaders in impact investing and grant making and evaluations be those people. Some people we’ve had on our decision panels are: Beau Seil, a managing partner at Unitus Impact, a leading impact investing firm in California and Rukmini Banerjee, who is on the leadership team at Pratham, a world class education provider in India and Isabel Guerrero Pulgar, a former World Bank economist.

The idea is we combine a venture capital approach with a kind of expert peer review approach. We do both. We try to marry evaluative rigor with a healthy appetite for taking smart risks and for identifying the kind of innovations and social entrepreneurs that will change the world for the poor in developing countries.

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