Omidyar Network India, renowned for paving the way for impact investment in India and uplifting more than 70 startups, created ripples in the ecosystem with their internal blog post. The dual-chequebook investment firm is shutting down its operations in the Indian market. The Indian subsidiary of Omidyar Group, backed by eBay founders Pierre Omidyar and Pam Omidyar; will not be making any more investments going forward.
Omidyar Network India was established as its own entity in 2019, separating its operations from the Omidyar Group; to focus on its India-specific investment thesis with a separate investment team. Though putting a stop to future investments, the firm will not be abandoning current commitments; it will be closing follow-on rounds committed to date.
“Over the last decade, Omidyar Network India has played a critical role in building the impact investment sector, especially focusing on the Next Half Billion. We are proud of our work in this space; which is now attracting larger pools of capital from local venture capital, impact investors, and domestic philanthropists than ever before. Having achieved our primary objective of catalysing impact, Omidyar Network India will not be making any further investments in India,” said Omidyar Network India in a statement.
The firm has invested over $500 million in Indian startups over the last decade; with nearly $150 million directed to non-profit investments. Its portfolio companies include names like 1mg, Bounce, Bijak, DealShare, Doubtnut, Entri, HealthKart, Indifi, M2P, and Pratilipi.
ONI’s declining portfolio
The firm reported that it will be completely transitioning out of the Indian market by the end of 2024. Over the coming months, the board and leadership team will assess how best to manage the organisation’s portfolio; while recognising the long and trusted partnerships that the Omidyar Network India team has built.
The past couple of years have been rocky for Omidyar Network India. One of its portfolio companies’, ZestMoney, valued at $450 at its peak, announced that it was shutting down last week. Its other portfolio companies, like Bounce, Dealshare, and Healofy, have come under fire for a weak business model, founder exits, and stagnant revenue growth. Another company, Doubtnut, valued at $50 million at its peak, was acquired for just $10 million.
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“This decision was heavily informed by the significant change in context and the growth in the economic landscape that the India-based team has experienced since first making investments there in 2010. Today, there is more Indian-led philanthropic and venture capital than ever before; the country has a vibrant start-up sector; and several funds now have a middle- and lower-middle-income focus as part of their investment strategy,” the blog post revealed further.
Pilling issues for ONI
Apart from the declining portfolio companies, many other factors converged that ultimately led to ONI halting operations in India. A leading focus is Omidyar’s difficulty with Indian law enforcement. In May 2023, the Finance Ministry exempted 21 countries from the levy of the angel tax for non-resident investment in unlisted Indian startups.
However, the list excluded some significant nations like Singapore, the Netherlands, and, more importantly for ONI, Mauritius. This meant that Omidyar, which invested in startups through a special-purpose vehicle named ON Mauritius, would be subject to taxes for the valuation gains of their portfolio companies.
In April 2020, Franklin Templeton unexpectedly closed six debt schemes, halting withdrawals and announcing the sale of assets to return investors’ money. An investigation by SEBI revealed that Vivek Kudva; then head of Europe, the Middle East, and Africa (EMEA) division of Franklin Templeton; along with his wife Roopa Kudva, withdrew Rs 30.70 crore from these funds just before their closure. SEBI found the fund house, its trustee, and eight other senior officials responsible for mismanagement; imposing a Rs 5 crore penalty on Franklin Templeton. Additionally, they were asked to refund Rs 451 crore (Rs 512 crore after interest) in fees collected between June 2018 and April 2020.
Vivek and Roopa Kudva were barred from accessing the securities market for a year. Roopa Kudva, who was the managing partner and face of Omidyar India at the time, exited the firm amidst CBI’s allegations for insider trading. This attack on Omidyar’s leadership further added to the strain the company felt from its stagnating operations.
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