🎙️ Anuradha Ramachandran — Investment Director @ Flourish Ventures and Experienced Impact Investor

Building the financial rails to help the underbanked in emerging markets

Happy Monday! And for those in the US, Happy Indigenous Peoples’ Day! We’re back after a large hiatus to share an exciting episode with Anuradha Ramachandran, previously Investment Director @ Flourish Ventures and an experienced impact investor who took a journey from the astrophysics to traditional market investing to impact investing. Her deep experience in finance informs her investment thesis in building financial rails for the underbanked in emerging markets.

Listen here for the full episode!

In this episode, we talk through her journey to becoming an impact investor at Flourish and how it expanded from the initial remit of the Omidyar Network (started by eBay founder Pierre Omidyar), the companies she invests in, the balance between Doing Good and Doing Well and debate the merits of promoting shareholder value while still maintaining the original mission and the inherent tension in that journey.

As always to the full episode above or check out the quick summary below and timestamps to peruse each of the topics. Enjoy!

How it all started

[1:00] Journey to Flourish Ventures

• Anuradha started in traditional finance, got into venture capital through a friend’s introduction and never looked back.
• Anuradha led the India practice in Omidyar Network but the number of investments was too large so they split up the practice and Flourish Ventures was created to focus on emerging markets (South & Southeast Asia, Latin America and Africa)

[4:30] Thesis at Flourish Ventures

• Focus on sectoral change by changing the way people interact with the financial system.
• Examples: financial rails companies such as Plaid — UPI — open source protocol for financial transactions created by the Indian Government, ZestMoney — consumer facing app to provide users liquidity

[8:52] Anuradha’s thoughts on UPI in India as a way to jumpstart the financial system and innovation

• UPI is an open system but is public infrastructure and thus makes it harder for private players built on it to charge a large fee.
• Transaction and convenience fees are most common in OTAs (online travel agencies) but hard to initiate for all financial transactions.
• UPI has started to connect with credit cards which may bring down the cost of credit card fees due to its open nature, thus opening up more liquidity for the underbanked and jumpstarting the Indian market.

Mission

[14:35] Uniqueness of Flourish’s mission

• Focused on the companies building financial rails and being patient in these investments understanding they can have long-term adoption curves (> 5–10 years)
• Investment Examples: Swap, M2P, Brick, Flutterwave are examples of Plaid-like businesses in Latin American, South / Southeast Asian and African markets respectively.

Doing Well & Doing Good

[16:35] How do you maintain the balance between doing well and doing good as the company grows?

• Invest in businesses first and foremost (rather than ideas) that have solid unit economics and an opportunity to monetize (e.g. “big data small credit”).
• Back founders through at least 2 rounds of funding and back the winners (defined by both impact and financial metrics).
• Tough love is important for startups to emphasize focusing on unit economics and pushing founders to not lose sight of it in lieu of the mission.

[22:40] Are there differences between metrics of doing well and doing good?

• We first look at impact — is this “democratizing finance” and will it affect the lives of low income and vulnerable populations OR is it increasing transparency and financial participation across all income levels?
• Financial metrics are paramount for emerging markets because there aren’t as many mature buyers for companies — so those are independent of impact and are always considered with impact metrics.

[25:45] When adoption is the key metric how do you determine how sticky a product or service is?

• Monitoring and quantifying user behavior and repeat usage on the platform
• What is the participation of the ecosystem (e.g. lenders and borrowers)? What is the proportion between these two and how can this be sustained?

Doing Good & Impact

[29:00] How do portfolio companies deal with conflicts between mission and doing well? (e.g. profitability via serving the ultra-rich vs. serving the underserved populations)

• Conflicts occur when the product does not serve underserved populations (e.g. 90% of folks are not salaried in the emerging markets so providing means a neo-bank for the underbanked must provide ramps on and off of saving)
• Goal of the fund is to ensure portfolio companies serve a wide range of users across the economic spectrum (rather than just the underserved) and thus prevent this conflict. Companies can use the ultra-rich to fund the service to the underbanked thus meeting financial metrics while also distributing the benefit equitably.

[34:00] How to sustain doing good over multiple rounds of funding and growth?

• Doing good is not separate from doing business in the emerging market because even the high net worth individuals are underbanked and need access to liquidity. This concept was also the core of eBay (the exit which funded the initial Omidyar Network fund). The opportunity to bring the whole socioeconomic ladder up in the emerging markets is HUGE.

[38:45] Example: Affordplan enables individuals to absorb large healthcare costs and plan for their financial future. How does this help bring the market up?

• Affordplan helps smooth out the experience of healthcare expenses when you or a loved one is in the hospital for populations across the socioeconomic spectrum.

Advice for the Listeners

[40:45] What advice would you give to founders or professionals interested in making an impact in the world?

• Empirically found that founders with a razor sharp focus on problems for an extended amount of time are most successful. A simple problem, articulated well and executed beautifully — simplicity is king!
• Work in a startup (if you haven’t already)! You get a 360 degree view of the whole business and you’ll grow quickly. If you’re an expert already, startups need you as long as you find the right one. The satisfaction of seeing your work directly affect the business is unparalleled!

Thanks for listening and reading! If you’re interested in learning more about Anuradha and her previous investments into helping build the financial rails of the Indian market, check out Flourish Venturesor follow her on LinkedIn!

Listen here for the full episode!

Stay tuned for more episodes in the coming month! Let’s keep the conversation going — doing good and doing well don’t need to come at the expense of the other. You can do both and we’re committed to bringing you the best examples of them to inspire you to start your own or contribute by working for one. If there’s a company you think would be a good fit reply to this email, leave us a comment or send us a note at hello@doingwellbydoinggood.co.

✌🏽Anand

Originally published at https://dwdg.substack.com on October 10, 2022.