VCs see risk in emerging markets, but they should also be seeing huge potential profits.
As valuations flounder for Silicon Valley startups once worth billions of dollars, investor interest is on the rise in startups with both financial and social benefits, such as healthcare software for poor communities or low cost solar panels for homes.
So-called “impact investing” rose to $15.2 billion globally last year from $10.6 billion in 2014, according to a recent report by the Global Impact Investing Network. The figure includes several types of investment, from funds to foundations, which intend to generate social and financial returns.
The group expects a 16% rise in 2016. The change reflects investor concern with current valuations of more mainstream technology startups, a desire to help by some investors and a broadening definition of social-good startups. There is also growing sentiment that the rise of mobile technology will allow for profitable upstarts in parts of the world relatively untouched by Silicon Valley.
Earlier this year Union Square Ventures Partner Fred Wilson called the developing world “the next whitespace” for venture capital, pointing to 2.5 billion people poised to adopt smartphones.
The drop in valuations for tech industry darlings that do “things my mom used to do for me” was a “pivotal wake up” for investors, said Doug Galen, chief executive of RippleWorks, which provides advisers for entrepreneurs in the developing world.