London Business School Institute of Private Equity

Tim Gocher’s Blog - Archive (January 2012)

From Charity to Private Equity – The Inevitable Path?

When the Dolma Development Fund was founded in 2003 to invest in sustainable businesses in Nepal and Ethiopia, we first attempted to raise a commercial fund. However, due to political instability, civil war in Nepal, and the absence of international deal success stories in such markets, it quickly became apparent that the only money available was philanthropic. Thus the Dolma Development Fund was born as a non-profit organisation taking donations and deploying capital using the private equity model, but with social and developmental targets baked into the mandate.

How times and funding options have changed! Witness the rise of Impact Investment and related funds – a growing subset of Private Equity which invests for both a financial and developmental outcome. Particularly relevant for us is the growth of developing market SME impact funds. These funds straddle the increasingly blurred line between for-profit and non-profit. They include pioneers such as Acumen Fund and Omidyar Network who operate funds on both sides of the line, as well as purely commercial funds including Pragati focused on India’s poorest states ($70AUM); Aavishkaar focused on rural regions of India (~$200m AUM); and Leopard Capital investing in Cambodia, Laos, Myanmar, Bangladesh and other frontier markets. The list goes on and on.

And as track records build, so the shape of the Limited Partner (LP) market is changing. The first funds were backed by big foundations and Development Finance Institutions such as IFC, CDC and FMO whose mandates were designed to shoulder the risks. But more recently, purely private and for-profit capital providers looking to combine returns with purpose have moved in. These include professional family offices, large corporate investment arms such as Cisco, and major financial institutions including J.P. Morgan and UBS.

Simultaneously, at the other end of the charity-commercial spectrum, NGOs and aid organisations are establishing impact funds of funds. These include names you might never have envisaged being associated with private equity. For example, charity icon Oxfam this year announced its $100m Small Enterprise Impact Investment Fund (SEIIF) managed by asset managers Symbiotics and focused on developing markets. DFID is planning a fund that would see it become an LP in impact funds for the developing world as part of its Private Sector Development strategy. And I couldn’t write a blog for the Coller Institute without mentioning plans at London Business School (OK, not a philanthropic charity but a non-profit nonetheless), to establish the LBS Social Venture Fund.

It is this apex, where NGO and private funds meet, which will define not only impact investment, but the core strategies of NGOs themselves. Private capital and businesses in developing markets have often been wary of NGO activities crowding out private sector potential. I recently heard of a British fund that had invested in a clean-tech business in Nepal founded by local entrepreneurs. Shortly after the investment, an NGO started giving away similar products and destroyed the market. This is a common story, but now private enterprise is just as likely to collaborate and co-invest with NGOs as compete with them. With DFID leading the way in private sector stimulus and others joining them, these organisations are becoming an important source of both funding and technical support to the commercial and impact investment sector. And they bring with them essential skills if such funds are to maximise their impact objectives.

South Asia is a major target for this burgeoning LP community. International capital committed to impact-related SME fund managers in the region now exceeds $2.3bn, with dedicated funds for India, Sri Lanka, Bangladesh and Pakistan – but not Nepal.

With six years of durable peace and solid economic growth in Nepal, yet a chronic lack of growth capital, the Dolma Development Fund is traveling what is becoming a well-trodden path for non-profits. It has launched Dolma Impact Fund I – a $20-40m for-profit Impact Investment fund. It is the first such fund ring-fenced for Nepal and will help fill the “missing middle” in SME capital, technology access and management skills, particularly for companies that can expand across the relatively free-trade border with India. The launch event took place last month at the Embassy of Nepal in London and was hosted by His Excellency Dr Chalise, the Nepalese Ambassador to the UK and Ireland.

The very fact that funds are able to successfully launch in such markets is a testament to the growth of the impact funding base, the complementary skills of the for-profit and non-profit sectors, and the increasing maturity of the Impact Investment asset class.

To watch the Dolma Impact Fund I launch event video, click here

For more information on any of the topics above, please contact

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About me

Tim Gocher

Chairman of Dolma Development Fund

Tim is a venture capital and clean-tech executive who is also founder and Chairman of Dolma Development Fund – a non-profit impact investor in Nepal and Ethiopia. He is also Chairman of Dolma Impact Fund I – the first commercial impact fund ring-fenced for Nepal. After nine years at Deloitte and J.P. Morgan, and an MBA from London Business School, Tim became Managing Director at listed merchant bank Interregnum plc. He has worked across the energy, renewables, technology and urban development sectors. His projects include launching E.On’s Community Power renewables business and advising governments and private groups on sustainable urban development and inward investment strategies in countries including Portugal, USA, Malaysia, China and India. He is co-founder and partner of Academy IP – a New York-based VC investor partnering with major, US research universities to invest in spin-outs.