'Investing for good' on the up amid rocky tech start-up market

As valuations flounder for Silicon Valley start-ups once worth billions of dollars, investor interest is on the rise in start-ups with both financial and social benefits, such as health care software for poor communities or low cost solar panels for homes.

So-called "impact investing" rose to $15.2 billion globally last year from $10.6 billion in 2014, according to a recent report by the Global Impact Investing Network. The figure includes several types of investment, from funds to foundations, which intend to generate social and financial returns.

The group expects a 16 per cent rise in 2016. The change reflects investor concern with current valuations of more mainstream technology start-ups, a desire to help by some investors and a broadening definition of social-good start-ups.

There is also growing sentiment that the rise of mobile technology will allow for profitable upstarts in parts of the world relatively untouched by Silicon Valley.

Earlier this year Union Square Ventures Partner Fred Wilson called the developing world "the next whitespace" for venture capital, pointing to 2.5 billion people poised to adopt smartphones.

Big financial institutions such as Bank of America and JPMorgan Chase are investing, seeing rural communities and emerging markets as potential customers for financial services.

The drop in valuations for tech industry darlings that do "things my mom used to do for me" was a "pivotal wake up" for investors, said Doug Galen, chief executive of RippleWorks, which provides advisers for entrepreneurs in the developing world.

The case for investing in social impact start-ups is the sheer size of the market; millions of people lack access to clean water, for instance. But, with companies serving customers living on $2 a day, profits can at times be slim.

"Maybe 2 per cent is a fabulous return in some cases," said Matthew Bannick, managing partner at Omidyar Network.

By comparison, traditional venture capitalists might seek a return 10 times their investment.