In 2004, eBay founder Pierre Omidyar and his wife, Pam, set aside some of the wealth they acquired after the online marketplace went public and created Omidyar Network, a philanthropic investment firm “dedicated to harnessing the power of markets,” according to an official overview.
Since then, the firm — which operates a 501(c)(3) nonprofit and an LLC — has committed $839 million in nonprofit grants and $735 million in for-profit investments. Today, 60 employees in Mumbai, London, Washington D.C. and Redwood City look for opportunities to invest and contribute across four main areas: Reimagining Capitalism, Beneficial Technology, Discovering Emergent Issues, and Expanding Human Capability.
In 2018, coinciding with a strategic shift that saw Omidyar Network spin out several of its initiatives, the firm elevated to CEO Mike Kubzansky, who had started the firm’s Intellectual Capital arm. In a wide-ranging discussion, Scott Bade spoke to Kubzansky about Omidyar Network’s origins and evolution, and his approach to venture philanthropy.
(This interview has been edited for length and clarity.)
Scott Bade: Omidyar Network has stood out because of its unique structure as both a grant-making institution and as an investor. Could you describe how Omidyar Network got started and how it evolved over the last decade and a half?
Mike Kubzansky: Pierre [Omidyar] originally started the Family Foundation. But having looked at the experience of eBay, he became frustrated that he couldn’t [achieve] the same scale of impact [that eBay had] in a conventional grant-making structure. So we converted Omidyar Family Foundation to Omidyar Network in 2004 with the fundamental insight to add to the classic 501(c)(3) structure of a foundation an LLC to enable us to invest in companies.
Great, and by investment, how does that work? Are you a typical LP or is there a different investment thesis?
Yeah, so historically first it’s worth saying, being influenced by Silicon Valley DNA, we have typically taken a venture lens on things and typically have invested at the seed or Series A round. Again, that comes straight out of the Silicon Valley experience.
Within that, we’ve had this notion of investing across the returns continuum. In some cases, we feel you can get a fully risk-adjusted market rate return. In some cases you might be ahead of the market, or looking at a firm that’s actually having a market-level impact, in addition to a firm-level impact. In those cases we’ve been willing to take a lower rate of return, at least at entry, in terms of what we would invest in. Typically it’s been venture, part of it syndicate; we have never taken a majority share in a company.
Before we dig deeper into the programmatic work, I want to dig deeper on your methodology. Clearly when it comes to both defining impact and figuring out how to measure it and maximize it, ON has been different from traditional philanthropy. But how do you define whether a given objective warrants either a grant or an investment or an advocacy approach?
You’ve hit on a question that we’ve spent a lot of time discussing internally. Having this flexible capital structure enables you to range across a lot of different forms of engagement in the world. So our thinking currently is – and this gets into our strategy shift – focus less on things that are easy to measure, like service delivery and financial inclusion and how many people are reached, and focus much more on upstream structural power, rules of the game, mindsets and beliefs about the underlying systems, which we think actually are at the root cause of a lot of the distress and income inequality we see in the world today.
Thinking like venture capitalists
You talked about thinking like a venture capitalist. Does that mean that that even with your philanthropy or advocacy you take on greater risks that are a long shot at achieving, but perhaps have a high-expected value return?
Yeah, so you’ve hit on exactly an issue that’s really important to us, which is the ability to take risk. Philanthropic money is the most risk-tolerant capital out there, whether it’s deployed for-profit or not-for-profit or on advocacy. And we view part of our role, in terms of social impact, as being risk capital for very difficult issues that society needs to take on. That mindset pervades how we think about approaching a problem.
We think about risk in a bunch of different ways: one, the ability to take on long-term issues which others may not be able to take on because they’re trying to make quarterly profits or that sort of thing. So there’s where we can take a run at some of the upstream rules of the game and checks on power, which might take time to accomplish. We [also] take it as an ability to take on difficult issues as well, not just time consuming, not just ones that have long-time horizons.
So what is your theory of change? Is your goal to be a think or do tank, is it to be an advocacy group, is it to shape norms, is it to fund pilots or some combination of that?
Yeah, I think we are, it’s fair to say we are still working through that, but we are in the process of putting out our points of view on what we think needs to change under capitalism and under technology. So for instance, we’ve published a point of view on what we think good digital ID looks like and ought to be.
Under the Reimagining Capitalism banner, our take is that it is going to take a mix of things. One [part is] about rebalancing structural power. For instance, working people have not typically seen any of the gains over the last 40 years where profits and productivity have gone up very dramatically but wages have stayed stagnant. So how do you rebalance power between working people and the companies or the capital sources that are working in the economy?
And so our theory of change includes some level of, how do you change the way people understand economics – everything from how you teach economics to how you measure to result of our economy, not in GDP but perhaps in wellbeing or other formats [like] by income decile – all the way straight through to ideas about who the economy is for.
We would argue that neoliberalism is a version of capitalism, it is not capitalism itself, and that we can get to a better version of capitalism if we change some of these underlying beliefs and mindsets about the economy.
… The original ethos of the Valley has tracked through to our notion that we want to see power redistributed back to people and away from concentrated sources of power.
How has being in Silicon Valley, the mindset of being in the tech world, influenced that thesis on capitalism?