The leaders of Leapfrog Investments are out to prove those who doubt that impact investing can scale and attract big dollar figures wrong. Last week, with a big commitment from the Overseas Private Investment Corp., it took a step in that direction as it became the first billion dollar equity impact investing firm.
Leapfrog, which invests primarily in African and emerging Asian countries, has always been “obsessed with scale,” according to CEO Andy Kuper. Since then the obsession has grown both because scale matters in financial markets but also because the scale of the need from the poor is immense. It’s a balance he describes as “scale for profit and purpose.”
Leapfrog’s strategy has been to have development finance institutions anchor each of their fund raises, but the bulk of the capital is coming from major private sector investors, including Zurich, Swiss Re, TIAA-CREF and AXA.
Leapfrog’s current funds reach 51.8 million people, the majority of which are low income and emerging customers in Africa, Asia and Latin America, who live on less than $10 a day. The company makes private equity investments of between $10 million and $50 million primarily to businesses in the financial services, insurance and healthcare industries. It then provides a lot of technical support from experts on staff to those companies to support their growth.
Devex talked to Kuper to learn more about how Leapfrog reached this milestone and what it means for the company and the industry.
Impact investing skeptics have often questioned the industry’s ability to scale. This is a pretty significant landmark for Leapfrog. What do you think it says about the broader impact investing market?
We’re at a transformational moment in the history of impact investing. I should say that the skepticism on scale and commerciality have been there from the start. When I started leapfrog in 2007 many people thought you couldn’t raise an impact fund of more than $100 million and you couldn’t do an impact deal of more than $3 million. Here you see Leapfrog with over $1 billion in approved commitments and doing investments that range up to $50 million.
So the perception that the field is uncommercial or is not at scale is no longer correct. Reality has proved the skeptics wrong. None of that is to say that there isn’t a spectrum in impact investing. There are people making very small investments, there are people making big investments. There are people doing impact investments instead of philanthropy and there are people who are trying to outperform KKR, Carlyle and TPG … It is that combination of profit with purpose, of not compromising or considering it a trade off between profit and purpose but rather seeking the synergy of profit and purpose that’s been so appealing to so many investors, so many team members and so many companies where we’re now invested.