After 12 years spent investing in impact-oriented financial services startups across the globe, the Omidyar Network, which serves as the family investment office for eBay founder Pierre Omidyar, is spinning off its financial inclusion investment limb as Flourish Ventures.
Equipped with up to $ 300 million in capital for operations and investments, the new Flourish will continue to invest around the Network’s core mission of backing companies with a dual focus of making a social impact and achieving quality fiscal returns.
Already, the new firm is one of the most active financial services investors globally, according to a report from FT Partners.
This double-bottom line approach has already yielded outcomes for the company.
” After 10 or 12 years with people becoming more broadly interested in the impact investment space, we had an opportunity to reinvent ourselves ,” says Tilman Ehrbeck, a managing partner at the newly independent Flourish.
Flourish is actually the third spin-out from Omidyar Network’s investment and philanthropic limbs. Two years ago, Omidyar spun out its U.S. emerging technology initiative as Spero, and last year launched a governance and citizen engagement-focused group called Luminate.
Now the organization, financed by Pam and Pierre Omidyar, will launch Flourish as the latest independent entity.
” We feel that we are the right team at the best place at the right time ,” says Ehrbeck.
Flourish, he says, is launching into a financial services environment that seems far different than it did when the Omidyar Network first identified financial services and inclusion as a focus region for its operations.
In the wake of the global financial crisis, financial services organizations indicated that they could not, or would not, deliver necessary access to consumers and small businesses. There was an erosion of trust, says Ehrbeck, and against a backdrop of stagnating wages and the changing nature of work, low and middle-income consumers and would-be entrepreneurs in emerging and established finance markets need all the help they can get.
Indeed, an entire generation of entrepreneur is leveraging a slew of technologies, from blockchain to the platforms that Omidyar Network had contributed to make through its earliest investments in the market.
That includes companies like Lenddo, an online lender utilizing alternative sources of social media data to ascertain the creditworthiness of applicants raised its first institutional capital in 2012 with capital from investors, including the Omidyar Network. That investment and the company’s subsequent consolidation with another Omidyar Network company, EFL, is indicative of the formative role that Omidyar — and now Flourish — can play in the growth of a business.
” We knew one another for three years. As we were looking to identify and scale we started to look at where there synergistic opportunities between smaller companies and could we put something together that would allow us to grow ,” says Lenddo chief executive Richard Eldridge.
That scaling has be paid for in Lenddo’s expansion into more markets and a more robust product offering.
Stories like those repeat across the Flourish portfolio of companies, and speak to the kind of value the company provides to portfolio companies, said Eldridge.
Indeed, Flourish’s global portfolio holds at least 40 fintech companies helping low and middle-income households and small businesses. From challenger banks like Chime, Aspiration, Neon, Albo and Tez; to insurance technology companies like MicroEnsure and Kin; and asset optimization tools, including United Income and Scripbox.
Given the explosion of interest in financial services offerings across challenger banks and through insurance technology offerings, Ehrbeck said it was a no-brainer for the company to spin out, focus and potentially expand.
With the spin-off, Flourish is taking the existent $200 million portfolio the team had built at Omidyar and expanding that with the additional capital commitment from the Omidyar Group.
The firm is also starting to realize its first exits. The firm realized a 3x return on its investment in Asian Networks and has had another exit in the sale of Ruma to Go-Jek.
” It’s a carve out of a successful team that has momentum and that Pierre wants to doubled down on ,” Ehrbeck says.” What’s carved out is the existing portfolio and a commitment to fund the next wave. The reason the number has a flexibility. Pierre devotes us the capital we think we can deploy against possibility .”
Flourish will do more than commit capital to financial services startups. It also has the opportunity to provide grants and encourage research around financial inclusion.
Some recent run from the firm included the financing of a study of 240 households called the U.S. Fiscal Diaries, which provided hard data around the illness that imbues a large swath of the U.S. population.
Investments from Flourish will fall into similar buckets as the firm’s previous operations under the umbrella of the Omidyar Network. Including alternative credit, challenger banks, insurance technologies and low-cost digital infrastructures that can level the playing field for financial services providers.
” We find a gap in the system and try to fill it and improve it ,” says Arjuna Costa, another partner on the new Flourish team coming over from Omidyar’s financial services group.
” We have the impact of companies scaling and reaching and serving people and led to replicators and challengers and widespread adoption ,” Costa says.
Lenddo and its credit-scoring business is a perfect example of current trends, according to Costa.
” We started investing behind a number of companies that were coming up to the utilization of nontraditional data sets to try and score people ,” he said.” We picked different data sets … we to be used in the pioneering company use mobile pay data, the pioneering company utilizing social media data, and the pioneering company employing psychometric data .”
As those companies gained traction and new clients, proving the market demand, Omidyar’s investments could scale to higher value offerings around financial services.
” Initially talking about those bargains other people in the industry looked at us and said that you’re nuts. And now it’s become the table stakes if you’re getting into giving ,” Costa says.” After building this digital infrastructure to enable credit … now there’s version two and version three of the infrastructure that’s come through here .”
Those higher value services are things like the agricultural lending business Rose Goslinga has launched for farmers in Africa.
” We bootstrapped our business for the first two years. They were the largest investor in our seed round ,” Goslinga says of the Flourish commitment to her company, Pula Advisors.
” Omidyar is extremely well-known in financing of the inclusion space. They had the first investment in micro-insurance 10 or 15 years ago. They are truly seen as the blue chip of financial or insurtech investors ,” Goslinga said.
With their investment, it validated Goslinga’s attempt to provide credit and working capital loans to small farmers.
” We had quite a number of clients at that point but we didn’t have any kind of institutional or fiscal investors at that point ,” Goslinga says.” It was a stamp of approval for a lot of people later in .”
In mature markets like the U.S ., Flourish’s approach is bit more nuanced, to serve a market with significant inefficiencies and baseline inequality, but one where the inequalities show in different ways.
That’s why Flourish has gravitated toward industries like Aspiration, which helps people bank more ethically — promoting sustainable investment portfolios and offering pay-your-own-fee for services; and Propel , which helps American consumers manage their public assistance benefits.
” At the highest level we look at the same criteria, we care about financial health and technology to promote financial health ,” says Emmalyn Shaw, a partner managing the firm’s U.S. portfolio.” The U.S. as a more mature market tends to be a lot more competitive .”