Last week, I had the great pleasure of attending the White House Global Development Summit with “a lot of do-gooders in one room,” as President Obama put it. The summit highlighted the administration’s progress in reshaping the US government’s approach to global development. It was a memorable day, packed with thought provoking speakers and panel discussions and culminating in a reflective “victory lap” speech from President Obama. My colleagues and I were honored that the summit featured the Global Innovation Fund alongside other initiatives launched under the leadership of the Obama administration, including the Open Government Partnership, Power Africa and Feed the Future.
In my remarks during a panel on “Partnering to finance the Sustainable Development Goals,” I highlighted what I see as the most encouraging shift under this administration: that the US government is increasingly behaving like an investor, not just a donor.
To be so bold, I would posit that our non-profit investment fund, the Global Innovation Fund, incubated and backed by the Obama administration, demonstrates this shift to an investment stance. Our approach, inspired by the pioneering work of USAID’s Global Development Lab and the Development Innovation Ventures program, has crowded in over $200 million from four donor governments and the Omidyar Network.
How does GIF illustrate the changing approach of U.S. development assistance? Several aspects of our approach tell this story.
1. First, we actively seek to crowd in the private sector with an entrepreneur-led model. We are nimble enough to make early stage angel and Series A investments with not only grant but also equity and debt financing. We see ourselves as a venture fund looking for social returns, complementing larger financial partners such as OPIC and the IDB. Too many entrepreneurs’ good ideas fail before they can reach the people they are intended to help because of the lack of early stage financing. At GIF, we help solve this “pioneer gap” by providing grant, debt and equity financing as little as several $100,000s - helping the most promising entrepreneurs test, adapt, and improve their business model and innovations past the “valley of death.” The most successful ones can then grow and scale and attract later stage financing to scale and reach thousands, even millions, of people.
2. Second, responding to the changing demands of the development world, we act as a social impact first, development-focused VC. Innovation in the development sector, how we work and what we do, will drive social returns.
3. Finally, there is our relentless focus on using evidence to make choices, trade-offs, and funding decisions. Evidence needs not only be for accountability; it can show a path for an innovation to scale. Meeting the global goals will require funds beyond aid, yes, but we owe it to ourselves, and US taxpayers, to make sure that funds are spent wisely, on things that are effective and impactful.
In fact, it’s the case that this investor approach to foreign assistance can amplify other efforts to increase development finance. With an appetite for smart risk, we can support firms with a social mission before they are ready to unlock impact investing capital or other development finance. We can also support experimentation and evidence gathering in domestic resource mobilization, such as in increasing tax compliance in developing countries or supporting remittance flows.
While the summit celebrated the achievements under the Obama administration, I was struck by the noticeably bipartisan nature of the US government’s commitment to global development. Several times, senior administration figures called out the important progress made under the Bush administration, especially in global health, which the Obama administration embraced and built on. In that spirit, we hope the next administration builds on the legacy of the past eight years and deepens the commitment to smart aid investing for the social good.