Yalin Karadogan, partner and global head of investor solutions at LeapFrog Investments, gives New Private Markets his take on integrity in impact investing, the value of building an impact ecosystem and the power of generative artificial intelligence.
Has the political backlash against ESG affected your business? How do you feel about it?
LeapFrog believes in the power of impact investing to help address the severe environmental and social problems of our planet, which are not going to solve themselves, with or without periodic backlashes. In an increasingly competitive industry, we continue to push for the highest standards of impact measurement and management to ensure the authenticity of the industry.
As impact becomes a more popular way to raise capital, we must ensure that impact is deeper than just a box ticking exercise to raise money. We must make sure it lives up to its promise, avoiding impact washing and orienting investors and companies towards deep as well as highly rewarding impact.
The impact investing market is scaling up and going mainstream; how is this affecting your business?
As one of the longest standing impact private equity firms globally, LeapFrog is glad to see the growing diversity of impact offerings and encouraged by impact becoming “mainstream”. As more and more people and institutions enter the market, you find that you can put more capital where it is needed, and you can collaborate with others in the industry to drive better outcomes.
Like in Silicon Valley, ideas need to be incubated in an ecosystem that helps them go from inception to fruition and scale. We think we provide this essential point of scale-up growth capital that takes companies from serving hundreds of thousands of people to serving tens of millions. As the whole impact ecosystem is developing, we’re keen to support others so that we create a network of purpose driven capital and ultimately a wider pool of potential acquirers also for our portfolio companies.
Which impact themes, sectors or strategies do you see as being most exciting and untapped?
Investing in growth markets continues to excite us at LeapFrog. As populations in India, Vietnam, Indonesia, Kenya and others soars in the decades ahead, their spending power will increasingly drive global trends and our team is laser-focused on identifying and investing in companies that cater to their growing demand. Investing in essential healthcare, financial services, or climate solutions now has great growth potential but has been, to date, vastly underappreciated by mainstream developed market investors.
How will the development of generative AI affect your business? Are you using or planning to use it?
At LeapFrog, our thesis stems from our focus on customer centricity – we focus on companies where the product or service is high quality, relevant and affordable to emerging consumers. Generative AI, deployed with the right guard rails, holds real potential to deliver this customer centricity at an even greater scale.
For example, we recently invested in a $30 million follow on round for our portfolio company HealthifyMe, in part to advance their generative AI capabilities. The Indian health and wellness company has been using AI since 2017 to provide nutrition advice to its millions of customers, and is now investing to upgrade its coaching and fitness products to enable more everyday consumers to access otherwise unaffordable healthcare.