ADB Ventures, the Asian Development Bank’s venture platform, supports startups offering impact technology solutions to help achieve the Sustainable Development Goals in Asia and the Pacific. It raised $60 million for its inaugural fund, and aims to crowd in more than $1 billion of risk capital by 2030.
Over the past year, ADB Ventures has been busy working toward those goals, reviewing more than 800 potential investment deals which have led to four equity investments.
Suzanne Gaboury, the director general of ADB’s private sector operations department, explains how helping startups to scale can spur development, and lays out the future for ADB Ventures.
1. How can investing in startups help countries in Asia and the Pacific achieve the SDGs and meet climate challenges?
The world is brimming with technology innovations that conserve energy, reduce greenhouse gas, and make communities and economies more resilient to the effects of climate change.
The private sector has ample demand for these solutions. Technologies that save energy also save operating costs. Circular economy technologies enable private investments in places that might otherwise lack sufficient infrastructure. New insurance technologies help SMEs manage disaster risk. New financial technologies help rural women access capital to diversify their incomes.
Because of this confluence between traditional bottom-line decision making and opportunities for SDG impact, many high-impact technologies have achieved wide implementation in developed markets.
The considerable investment needed to address climate action across the Asia Pacific can’t all come from development partners and government treasuries. It makes sense to invest risk capital in scaling startups where that investment can catalyze private sector investment in sustainable outcomes at a high multiplier.
That is why ADB created a venture arm, ADB Ventures, to support and invest in early-stage technology companies that address urgent development problems in emerging Asia and the Pacific.
2. But uptake in the ADB’s developing member countries has been limited. Why is that?
We’re typically looking to invest in companies that already have commercial traction in the region that are ready to scale their impact.
The first reason is market expansion risk. Asia Pacific markets are diverse and fragmented by geography, culture, public policy. Startups must adapt their technologies and business models market-by-market, often amid limited information and low transparency. Climate innovators often consider it easier to focus on mature markets in other regions, despite exciting market opportunities in the Asia Pacific.
The second reason is financial risk. Venture capital portfolios are statistically less likely to focus on climate-friendly investments in cleantech, clean energy, and agriculture. Instead, they tend to be concentrated in developed economies, later-stage deals, and software technologies such as e-commerce. In 2018, only 2% of global VC deals were for cleantech, and only 3% of global VC deals were for agricultural technology.1
3. How does ADB Ventures address these risks?
Our vision is to crowd in more than $1 billion of risk capital by 2030 towards the Sustainable Development Goals. To get the ball rolling, ADB has raised $60 million for ADB Ventures’ inaugural equity fund.
We have a target of directing 80% of our investments towards climate impact. 75% of our investments must additionally address gender. Consequently, we concentrate on verticals including cleantech, clean energy, agricultural technologies, inclusive fintech, and health.
Our primary function is to invest, and our equity fund can take equity positions up to $4 million first check, with funds typically reserved for follow on investments. We’re typically looking to invest in companies that already have commercial traction in the region. In other words, they have validated their business models and value propositions, and they are ready to scale their impact.
Once we invest, ADB Ventures can add value through the Asian Development Bank’s robust operational processes, safeguards, extensive networks, and considerable experience as a leading development partner in Asia and the Pacific. We believe this is why early-stage companies should want ADB Ventures in their investment rounds. We can help impactful companies scale faster.
We have spent the last year reviewing more than 800 potential investment deals. We have performed intensive due diligence on 47 of those. And all of that work has so far resulted in four equity investments.
4. Can you tell us about these investments?
These are four extraordinary companies. Our first investment was into Euler Motors, which makes light electric vehicles for last-mile commercial logistics. Euler is well-positioned to be a leader in India’s sustainable mobility market thanks to its proprietary battery cooling technology, optimized design, integrated vehicle diagnostics, battery management technology, and charging station networks. It has marquee customers like Amazon, Flipkart, and BigBasket.
Our second investment, Skycatch, has developed enterprise-grade technology for capturing, processing, and analyzing high-accuracy 3D drone data. By using Skycatch’s technology to create ‘digital twins’ of construction and infrastructure projects, it is possible to save cost and time, cut waste, reduce C02 emissions, and improve safety. Skycatch aims to support 2,000 projects in Asia and the Pacific by 2025.
Our vision is to crowd in more than $1 billion of risk capital by 2030 towards the Sustainable Development Goals. To get the ball rolling, ADB has raised $60 million for ADB Ventures’ inaugural equity fund.
Smart Joules increases the energy efficiency of hospitals, commercial and industrial buildings. But what’s really innovative is its “as-a-service” business model. Traditional energy-efficiency equipment is expensive and prices out many potential customers in developing markets. Smart Joules identifies energy-saving opportunities in buildings, retrofits them with modern equipment and sensors, and uses proprietary algorithms to increase energy savings. It installs equipment at its own cost and charges customers based on an affordable recurring subscription fee.
Our most recent investment was in a company called Wagely. Wagely is a holistic financial wellness platform that helps low- and middle-income workers in Indonesia to overcome financial shortfalls through on-demand access to earned wages and financial literacy education. Wagely aims to bring its solutions to more than 400,000 low- and middle-income workers by 2025.
5. What other partnerships has ADB Ventures initiated to amplify the development impact of start-ups in Asia?
One of our most valuable tools for connecting with new startups is our partnership with Plug and Play. Through the Plug and Play platform, we can access a global network of tens of thousands of the world’s most innovative companies. We also get access to a corporate matching platform that gives us priceless feedback on startups’ potential to scale in our region. ADB first partnered with Plug and Play two years ago to help Asia’s hotels and resorts invest in sustainability and energy efficiency. Recently we expanded our partnership to work together comprehensively across a range of themes and sectors including sustainability, food and agtech, fintech, smart cities, and sustainable travel
But this partnership is not a one-way street. ADB hopes to contribute value back to Plug and Play by introducing startups from frontier developing member countries, keeping our door open to Plug and Play’s corporate partners, and by finding other opportunities to showcase Plug and Play batch startups to our networks across the region.
6. What does the future hold for ADB Ventures?
These four investments are just the beginning. ADB Ventures plans to make 12 more investments under our inaugural $60 million equity fund. In addition, we will take positions in as many as 35 other companies, using reimbursable grants. Meanwhile, we have begun raising a $100 million debt fund, which we hope to bring online early next year.
ADB Ventures has an insatiable hunger to connect with the best, most innovative, most dynamic, and most scalable impact technology startups in the Asia Pacific.
Source: https://www.adb.org/news/features/how-adb-ventures-leveraging-innovation-help-asia-meet-sdgs
