Omidyar Network suggests that industry sector investments will have greater impact
The recently released paper titled ” Priming the Pump” builds a case for a Sector Based Approach to Impact Investing. Since 2004 there has been an increasing interest in making targeted investments that have great impact for those in need. With this discussion paper Matt Bannick and Paula Goldman of the Omidyar Network share how impact investing should focus on industry supply systems in order to yield greater success.
Scaling entire industry sectors
The argument is that more lives will be touched “by concentrating investments in specific industry sectors in specific geographies, and by investing in a range of organizations to accelerate the development of industry segments”. They acknowledge that successful enterprises grow when they have a strong and supportive foundation. That the supply chain within a sector must grow in unison with individual entrepreneurial efforts.
If a local concrete producer is to succeed and scale his business, he will need a functioning aggregate and sand production supplier. He will also need access to a materials testing laboratory, some engineering support, good structural steel suppliers and other trustworthy vendors. The impact of investing in the complete supply chain will not only improve the economic fortunes of the local communities, it will also build in greater resilience and safety into the region. This broader investment strategy is the focus of the ON paper.
By embracing and nurturing full industry sectors, the individual entrepreneurs that grow within the chain have better odds of …”reaching scale and competition that will foster the delivery of better products at lower cost” When early stage innovators find support from a working supply chain, their risk is reduced and the impact of the investment dollars are better leveraged. As the sector becomes more dynamic, tomorrow’s next great scalable innovation has fertile ground in which to take root and grow. This expanded investment strategy make a great deal of sense.
Concrete supply chain
It is the Cement Trust’s contention that the concrete construction sector is ripe for impact investments. There are many entrepreneurial opportunities that would scale within the sector once the greater supply chain infrastructure begins to develop. There are proven business models that can be adapted and appropriately scaled in many developing regions around the world.
There is no question that concrete is a commodity that impacts enormous groups of disadvantaged people. Crumbling buildings from the poor use of concrete is well documented, yet mostly ignored by investors. These investments would yield better buildings and greater resilience among the poor as the supply system grows. The international concrete supply sector has the resources to make an impact in this effort, so we call upon the major players to read the ON report and take some action within the impact investment space.
The Omidyar Network is a philanthropic investment firm that was established in 2004 by eBay founder Pierre Omidyar and his wife Pam. To date, the organization as committed more than $550 million to make an impact.