U.S. Development Agency seeks to expand overseas direct equity investments | FI SENSE

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The U.S. International Development Finance Corp., a federal agency that helps finance projects in developing nations, plans to boost its direct investments in young companies in developing economies ina bid to expand its pipeline of opportunities.

The agency is issuing a call for proposals from impact-focused early- and growth-stage companies across emerging markets and intends to commit between $10 million and $25 million per company, according to two agency officials who declined to be named. The DFC plans to focus primarily on technology and tech-enabled services companies in sectors that include finance, education, logistics and digital health, according to the officials.

“Direct equity will allow entrepreneurs to more efficiently scale operations,” one of the officials said. “The cash flow they normally use to service debt interest payments can now be used to hire more engineers and ultimately create more development impact.”

The new initiative follows a direct investment push the agency made earlier this year through its private-equity investment portfolio. In June, the DFC approved its first equity investment, pledging up to $20 million to Freshtohome Foods Private Ltd., an Indian e-commerce startup that supplies meats and produce across the country. The agency sourced the deal through its relationship with Iron Pillar, an India-based venture-capital fund, according to the agency officials.

To streamline and expand the direct equity investment process, the agency has set up a new office of equity investments and is recruiting staff for it, according to the officials.

One of them added that the federal agency hasn’t set an upper limit on the total capital it would commit to the direct equity program.

“We are trying to demonstrate how powerful this equity tool can be to generate additional support from the Congress so we can get more capital through their appropriations process,” he said.

The DFC officially launched early this year. The agency was authorized by a 2018 law that combined operations of the Overseas Private Investment Corp. and part of the U.S. Agency for International Development and is meant partly as an alternative to China’s Belt and Road Initiative.

 

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