Impact Investing: The Value of Human Capital

Earlier this month in Shoreditch, London, on a day that is becoming known as Giving Tuesday (in contrast to the preceding and less altruistic Black Monday), twelve TPW members came together to lean about impact investing. The question was, how can social change be achieved with a formal investment philosophy and an expectation of financial return?

To find out the answer, The Philanthropy Workshop joined forces with Omidyar Network, a philanthropic investment firm based in Silicon Valley, established by e-Bay founder, entrepreneur and philanthropist, Pierre Omidyar and his wife Pam Omidyar. So began a day-long exploration of what it takes to be an effective impact investor.

The energetic and deeply knowledgeable Omidyar Network team was a joy to listen to as they presented and inspired on topics ranging from their unique hybrid financing structure – recently modeled by the Chan-Zuckerberg Initiative – to their process for identifying, supporting, and growing social enterprises.

We learnt how Omidyar finds and partners with strong investees (top tip: choose a partner with robust business plans, rather than falling in love with the possible impact), makes deals  (top tip: do so only with people you share values with) and measures and evaluate change (top tip: learn from your mistakes).

We explored two fascinating case studies, with social AND financial returns worth boasting about: a micro-insurance programme for the world’s poor (Microensure) and Bridge International Academies, a low-cost private education provider in Africa, now with 400 academies and 100K students. Both had expansion rates that make it all look rather easy.

The most valuable insight for me was how support for their investees extends way beyond the provision of financial capital to human capital. Omidyar has significantly increased its own team in order to provide its portfolio companies with a wide range of human capital capabilities to help them achieve their growth and performance goals. This includes Omidyar Network representation on boards, executive leadership coaching and talent management training, to the recruitment of C-level talent. The time commitment is substantial but the investment in human capital seems to deliver significant results.

How many TPW philanthropists invest in human capital in this way, I wonder? Omidyar also provides opportunities for its investees to build relationships with each other, a critical component of the firm’s sector-based approach to social change. If you want to hear more about the way human capital can support social enterprises, then this short video might be of interest.

Click to view: Omidyar Network Human Capital video

The day finished with further discussion and debate over a delicious meal in Shoreditch, watched over by Damien Hurst’s “Cow and Chicken in Formaldehyde.” Yes, it seems some things are meant to go together.

Jo Ensor is Director of The Philanthropy Workshop. For more information, follow Twitter @TPWgivebetter or visit TPW.org.