- Read: At ADB Ventures, the bottom line is to help developing Asia meet the SDGs
- ADB Ventures’ vision is to become the Asia Pacific’s largest impact technology platform to contribute to the achievement of the SDGs by 2030.
- Isn’t it unusual for a Multilateral Development Bank to start a venture investment platform? Read how and why ADB did it.
In early 2020, ADB launched its first venture investment platform, ADB Ventures. It’s a venture capital investor with a difference. Like all VC investors, ADB Ventures will pursue commercial returns, but it will target investments in companies and technologies that deliver development impact in emerging markets in Asia and the Pacific. ADB Ventures can also provide pre-investment grant support and guidance to businesses exploring and piloting strategies to build commercial scale in these markets.
ADB Ventures is led by Sherwin Pu, head of business development at ADB’s Private Sector Operations Department. He explains ADB Ventures’ mission to help developing Asia attain the SDGs, and its goal to become the region’s largest impact technology platform by 2030.
What is ADB Ventures? How does it differ from a typical venture company?
ADB Ventures is the Asian Development Bank’s new impact-technology investment platform, established in January 2020 and operational since August. Its business model is to deploy venture capital investments and technical assistance to support early-stage technology businesses that can have an impact on the Sustainable Development Goals (SDGs) in developing Asia and the Pacific.
ADB Ventures has some unique added-value features that distinguish it from conventional venture capital funds. The inaugural ADB Ventures Investment Fund 1 has a 17-year fund life and is augmented by a three-year, $12 million technical assistance program. This allows us to invest patient capital and help bring best-in-class technology to market, underpinning solutions that make real difference to low-income communities in developing Asia.
“The private sector and innovative business ideas can play a powerful role in addressing the region’s development challenges.”
It’s early days, but we’re making excellent progress. In April 2020, ADB Ventures’ Investment Fund 1 announced it had raised $50 million from multilateral and bilateral development partners, exceeding its close target. The first investors in the fund are Finland’s Ministry for Foreign Affairs, the Clean Technology Fund, the Nordic Development Fund, and the Republic of Korea’s Ministry of Economy and Finance.
Two technical assistance-funded activities—the ADB Ventures Seed Program and ADB Ventures Labs—will also help us support young companies with fresh ideas. ADB Ventures Labs helps early-stage impact technology companies to discover and develop opportunities to scale-up in developing Asia-Pacific markets. The ADB Ventures Seed Program provides grants to help companies capitalize on market opportunities, and to de-risk expansion into emerging markets that they might otherwise not enter.
Isn’t it unusual for a Multilateral Development Bank to start a venture investment platform? How and why did you do it?
The Asia Pacific is brimming with innovative early-stage companies with technologies that can have transformational environmental and social impacts in areas like sustainable agriculture, and digital health.
Unfortunately, these firms struggle to access early-stage capital to finance their growth. This is because risk capital is concentrated in larger, more developed markets. It favors sectors such as e-commerce at the expense of sectors that can deliver direct sustainable development impacts.
ADB Ventures helps to bridge this gap. It can make investments up to $4 million in early-stage businesses with technology-enabled solutions. We invest for commercial returns and prefer to mobilize commercial capital through co-investing with private sector.
Once we fund a solution, ADB helps to promote the business across borders to ensure maximum impact. Our regional departments and country resident missions work with ADB Ventures investees to adapt their approach to market country-by-country, and to access unique relationships and opportunities.
Which sectors/industries and company types are you focused on, and why?
The private sector and innovative business ideas can play a powerful role in addressing the region’s development challenges. Accordingly, ADB Ventures’ inaugural Investment Fund 1 is focused on early-stage companies with solutions that address climate change and empower women.
This informs the choice of sectors that ADB Ventures supports through Investment Fund 1—namely cleantech, inclusive fintech, sustainable agriculture and health technology solutions.
Through ADB Ventures Labs, we have helped more than 50 early-stage impact technology companies explore opportunities in developing Asia through initiatives including:
- The Building Energy Challenge, in partnership with New Energy Nexus, matches the commercial real estate sector’s demand for energy efficiency technologies with solutions like energy management and smart building.
- Imagine H2O Asia, working with Imagine H2O and Enterprise Singapore to deliver innovative water technology solutions for utilities at ADB’s developing members.
- Travel Lab Asia, with the Pacific-Asia Travel Association and Plug and Play this initiative helps provide clean technologies for energy, water, and waste management solutions to the hospitality sector.
- Future Food Asia Awards 2020, teaming with ID Capital to identify agritech and food security solutions for ADB’s developing members.
Please provide examples showing how your investment strategy has had development impact.
We are committed to a minimum of 15 investments and at least 40 grants by 2022 through the Seed Program. So far we’ve provided Seed Program funding to several innovative early-stage impact companies for scalable climate and gender impact.
ADB Ventures provided a Seed Program grant to Piñatex (by Ananas Anam UK Ltd.), a high-end leather substitute made from pineapple leaves, an agricultural waste product. This enables the company to streamline production processes and cut Piñatex’s selling price by 30% - making it more competitive in the genuine and synthetic leather markets.
“ADB Ventures’ vision is to become the region’s largest impact technology platform, crowding in more than $1 billion of risk capital to contribute to the achievement of the SDGs by 2030.”
The development impact of this grant is clear. The fashion industry causes 10% of annual global CO2 emissions and its escalating demand for cheap leather is making production environmentally unsustainable and unsafe. The company’s Philippines-based operation also provides employment opportunities for local workers, many of whom are women. But our interest in the company is also driven by its high-quality products, incredible unit economics, and customer relationships with leading fashion brands and hotel chains.
A Seed Program grant has also been provided to Good Brick System (by InnoCSR Co., Ltd.) – a brick-making solution in Nepal that presses bricks with soil stabilizer instead of firing them in a kiln.
Nepal’s nearly 1,600 brick kilns burn 1 million tons of coal every year, according to the World Bank and are responsible for 37% of Nepal’s CO2 emissions. It causes approximately 600 deaths a year, placing a $46 million annual burden on Nepal’s public health system. But here again, we have strong commercial incentive to invest given the rate of new construction across developing Asia and the opportunity to bring positive change to a brickmaking industry that has changed little over hundreds of years.
How do you see ADB Ventures evolving over the next decade or so?
ADB Ventures’ vision is to become the region’s largest impact technology platform, crowding in more than $1 billion of risk capital to contribute to the achievement of the SDGs by 2030. Its operations plan has three phases:
Phase 1: Set-up and launch Our initial target through Investment Fund 1 is to support and invest in technology businesses delivering solutions in parts of Asia where they can have the most impact, particularly on climate change and empowering women.
Phase 2: Scale across Asia and the Pacific By 2025, ADB Ventures plans to enable multiple financial platforms that support startups with significant potential to scale their operations and deliver impact across Asia Pacific. We also aim to scale our operations across the region, and focus on additional SDGs.
Phase 3: Become a leading platform in Asia and the Pacific By 2030, ADB Ventures aims to crowd in more than $1 billion of risk capital, reaching $500 million on our investment platform. This means for every $1 we invest, we aim to leverage $2 from the private sector.
How does ADB Ventures help countries achieve the SDGs?
“Our goal is to help these businesses expand into emerging markets across Asia and the Pacific. ”
Through venture capital investments and technical assistance, ADB Ventures helps businesses with highly scalable, technology-driven solutions such as conserving energy, reducing waste, fighting climate change, and delivering public services effectively. Our goal is to help these businesses expand into emerging markets across Asia and the Pacific.
We start by assessing commercial demand for impact-related technology in the region. Then we source and match best-in-class technology solutions that help ADB’s developing member countries to achieve the SDGs.
Broadly, we support early-stage companies whose solutions can help achieve SDGs, but which presently don’t have the financing to bring these solutions to market. We do this by reducing market entry risks through partnerships with accelerator programs that specialize in matching early-stage companies with commercial opportunities to support their growth, and by connecting early-stage companies with our own corporate and public sector networks.
Second, we enable rapid market validation of solutions offered by early-stage companies by providing reimbursable grant funding up to $200,000. This money reduces market entry risks. Finally, we provide patient capital, investing up to $4 million of venture capital in early-stage growth companies with technology-driven solutions that can improve lives and livelihoods in across the region.
For inquiries, contact the ADB Ventures team.