The rise of open data driven businesses in emerging markets

Alla Morrison at the Worldbank blog:

Key findings —

  • Many new data companies have emerged around the world in the last few years. Of these companies, the majority use some form of government data.
  • There are a large number of data companies in sectors with high social impact and tremendous development opportunities.
  • An actionable pipeline of data-driven companies exists in Latin America and in Asia. The most desired type of financing is equity, followed by quasi-equity in the amounts ranging from $100,000 to $5 million, with averages of between $2 and $3 million depending on the region. The total estimated need for financing may exceed $400 million.

“The economic value of open data is no longer a hypothesis
How can one make money with open data which is akin to air – free and open to everyone? Should the World Bank Group be in the catalyzer role for a sector that is just emerging?  And if so, what set of interventions would be the most effective? Can promoting open data-driven businesses contribute to the World Bank Group’s twin goals of fighting poverty and boosting shared prosperity?
These questions have been top of the mind since the World Bank Open Finances team convened a group of open data entrepreneurs from across Latin America to share their business models, success stories and challenges at the Open Data Business Models workshop in Uruguay in June 2013. We were in Uruguay to find out whether open data could lead to the creation of sustainable new businesses and jobs. To do so, we tested a couple of hypotheses: open data has economic value, beyond the benefits of increased transparency and accountability; and open data companies with sustainable business models already exist in emerging economies.
Encouraged by our findings in Uruguay we set out to further explore the economic development potential of open data, with a focus on:

  • Contribution of open data to countries’ GDP;
  • Innovative solutions to tackle social problems in key sectors like agriculture, health, education, transportation, climate change, financial services, especially those benefiting low income populations;
  • Economic benefits of governments’ buy-in into the commercial value of open data and resulting release of new datasets, which in turn would lead to increased transparency in public resource management (reductions in misallocations, a more level playing field in procurement) and better service delivery; and
  • Creation of data-related private sector jobs, especially suited for the tech savvy young generation.

We proposed a joint IFC/World Bank approach (From open data to development impact – the crucial role of private sector) that envisages providing financing to data-driven companies through a dedicated investment fund, as well as loans and grants to governments to create a favorable enabling environment. The concept was received enthusiastically for the most part by a wide group of peers at the Bank, the IFC, as well as NGOs, foundations, DFIs and private sector investors.
Thanks also in part to a McKinsey report last fall stating that open data could help unlock more than $3 trillion in value every year, the potential value of open data is now better understood. The acquisition of Climate Corporation (whose business model holds enormous potential for agriculture and food security, if governments open up the right data) for close to a billion dollars last November and the findings of the Open Data 500 project led by GovLab of the NYU further substantiated the hypothesis. These days no one asks whether open data has economic value; the focus has shifted to finding ways for companies, both startups and large corporations, and governments to unlock it. The first question though is – is it still too early to plan a significant intervention to spur open data driven economic growth in emerging markets?”