SAN FRANCISCO — A decade ago, Omidyar Network shifted from making individual grants and investments to considering ways to support entire sectors across its initiatives.
While the philanthropic investment firm continues to support early-stage organizations that demonstrate the potential for disruptive innovation, the team determined that no single organization could bring about the level of social change they sought. A report out this week measures the impact of Omidyar’s first decade of investments of $750 million across 380 organizations and shares lessons from this shift in approach.
Devex spoke with Sonny Bardhan, who is a director of Omidyar Network’s Intellectual Capital Team, about some of the key learnings from the impact analysis.
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“Reach is not the be all end all,” he said, adding that measuring depth is more challenging. “It is easier to measure impact when we have direct impact, meaning investing in organizations that directly serve customers or beneficiaries or are one step away, and it is harder to measure impact of organizations focused on policy or advocacy or ecosystems.”
Many impact reports tend to focus on the number of people served, Bardhan said, adding that “headline” numbers like these are “useful but not sufficient.”
After surveying available impact measurement options, and finding them lacking in certain ways for the Omidyar Network portfolio, he and his team decided to come up with its own methodology in which they sought to identify what they call “Impact Stars.”
The measurement system captures an organization’s potential for direct impact on customers or beneficiaries as well as its influence in the broader development of its sectors. The report notes a “roughly inverse relationship” between the number of people reached and the depth of impact per person.
“Measuring sector impact is a lot harder than measuring direct impact, but we at least attempted to do that,” Bardhan said. “We aspire to have sector-level impact. Not all our investments get to do that. The most successful ones do.”
One in 5 of those investees are what the firm would designate as an Impact Star, according to the report. Bardhan explained that this aligns with his view of reasonable expectations for early-stage, high-risk investments in venture capital. Bardhan added that one of the things the firm aims to do going forward is ensure that its nonfinancial support goes toward the most impactful investees.
“For the ones that have matured a bit more, and don’t show same level of traction as others, we need to be careful about resource allocation,” he said.
Moving forward, Bardhan said the Omidyar Network hopes to do initiative level impact reports and incorporate more customer perspectives into impact assessments.
Update, Oct.7, 2018: This story has been updated to clarify that the report measures the impact of Omidyar Network’s first decade of investments.