As part of Omidyar Network’s plan to update its strategy, focusing in part on the difficult task of reimagining capitalism, the organization recently announced it was spinning off several long-standing initiatives into independent ventures. Earlier this month, the global impact investment firm announced its latest move: Turning its financial inclusion initiative into Flourish, a venture firm aimed at backing entrepreneurs forming impact-oriented financial services enterprises.
“We felt it was important to start as a new firm that has a view of what a fair system would look like, is purpose driven and works with like-minded entrepreneurs whose innovations help people achieve financial health and prosperity,” says Managing Partner Tilman Ehrbeck.
While new fintech ventures have allowed more than one billion people around the world to enter the conventional financial world, in many emerging markets more than half of working age adults still live and work in the informal economy, according to Flourish. As for the U.S., the majority of households are not financially healthy, living paycheck to paycheck.
At a deeper level are developments that have occurred since the global financial crisis. Mainstream financial services companies failed to provide much help to regular folks and small businesses, in the process hurting whatever trust there may have been in those institutions. At the same time, low-and-middle-income workers face a world with wages that stubbornly refuse to increase significantly and livelihoods threatened by technological advances, along with growing economic inequality and a hyper-connected, yet highly fragmented, world.
For those reasons, among others, says Ehrbeck, Omidyar founder Pierre Omidyar, “decided it was time to double down and more.”
To address these issues, Flourish’s investments will target pretty much the same areas as before: alternative credit, insurance tech, new banks and digital infrastructure. Its portfolio includes some 40 fintech ventures targeting financial inclusion in emerging markets, as well as the U.S. Example: Steady, a startup that connects U.S. workers in the gig economy with gigs, helping them increase their earning opportunities, while making the most of their skills and available time.
Plus, the firm will provide grants to fund “sector specific public good” work, says Ehrbeck. That can include anything from research related to financial inclusion, like the U.S. Financial Diaries, which tracked 235 low- and moderate-income households over the course of a year to collect data on how families manage their finances on a day-to-day basis, or issues related to regulations and policy.
As for its own funding, Flourish is taking the $200 million portfolio it had at Omidyar. It also has $300 million more at its disposal over the next five years. Investments will largely be seed and Series A rounds, although the firm could participate in later rounds for enterprises already in the portfolio, according to Managing Partner Emmalyn Shaw.
The spinoff is one part of Omidyar’s larger strategy. In addition to spinning off initiatives into independent organizations, it plans to focus on what it sees as a core set of pressing issues, including “reimagining capitalism, promoting the beneficial use of technology, building bridges in a pluralistic world and fostering individual capabilities and empowerment,” according to a recent blog post by Mike Kubzansky, managing partner at Omidyar. With an approach that has combined impact investing with traditional grant making, the organization has committed $1.3 billion to more than 700 organizations.