A longstanding criticism of the US foreign aid apparatus, leveled before the dramatic changes of the last year, was its failure to innovate and facilitate new solutions to development challenges. For decades, oversight pressure fueled deep risk aversion—stifling much of the experimentation that innovation requires. Yet there were bright spots and narrow channels actively confronting this dynamic. Among the standouts was USAID’s Development Innovation Ventures (DIV), an open innovation fund launched in fall 2010. With bipartisan support, DIV operated for nearly 15 years, nurturing a portfolio of investments that an evaluation of its early years found yielded an outstanding 17-to-1 rate of social return. But with the dismantling of USAID, so went DIV. There are few areas where philanthropy is positioned to fill the increasingly yawning gaps left by donor cuts. But the DIV model—a tested and proven means of supporting the piloting, testing, and scaling of innovation—proved ripe for an infusion of private capital. In February, the new DIV Fund launched as an independent non-profit organization. And just yesterday, the DIV Fund opened its first call for applications.
The DIV Fund is unique in its approach to philanthropic grantmaking. DIV’s call for applications is open, rather than restricted to a particular sector, approach, or type of organization. It is also tiered, allowing DIV to size investments appropriately to the maturity of the innovation and level of risk. Small phase 1 awards fund real-world pilots to test the viability of an innovation—a proof-of-concept. Slightly larger phase 2 awards fund rigorous testing, typically through randomized controlled trials or rigorous market testing, to determine cost-effectiveness and scalability. The biggest phase 3 awards fund large-scale expansion of high-impact, cost-effective innovations. This venture-capital approach aims to achieve high returns across the entire portfolio—acknowledging that many investments will not demonstrate impact or scalability, but that some will reach great scale and drive a high social return on investment.
In the 14 years of DIV’s operation at USAID, DIV’s modest funding was awarded to innovators through 327 investments in 53 countries, improving the lives of more than 200 million people. DIV funded over 150 randomized controlled trials, generating evidence of immediate value to investment decisions and that could inform the growing body of evidence on cost-effective development innovations. Many DIV-funded innovations are still operating at scale—such as school-based deworming, a teaching model that aligns math and reading instruction to actual learning levels rather than a grade-level syllabus, and innovative contracting to improve diagnosis and treatment of malaria—reducing disease burden, improving math and reading skills, and increasing long-term consumption, among other impacts.
Among policymakers, the concept of innovation has many fans. Still, even where there’s plenty of lip service, it’s rarely paired with the enabling support needed to help drive (or pull) innovations to market. DIV was small but delivered outsized impact, so much so that other donors have sought to emulate the approach. In 2021, France launched its own Fund for Innovation in Development (or Fonds d'Innovation pour le Développement).
As donors reduce their foreign aid commitments, identifying and supporting high-impact programming becomes all the more critical. And it’s where the DIV Fund offers additional value. Governments and the private sector are key actors in scaling cost-effective innovations, but often underinvest in social innovation. DIV Fund takes on those early investments in R&D, and, for promising innovations with a pathway to scale, facilitates market entry or government adoption—even reducing the need for sustained official development assistance or philanthropic support. Where DIV was an embedded part of the US government, the DIV Fund will deliver on the same mission independently.
Notably, language in a recent State Department reauthorization bill suggests lawmakers are keen to see this kind of tiered-evidence fund revived inside. We hope any future US government innovation fund takes into account key lessons from USAID’s DIV:
- Focus on social return rather than financial return alone.
- Embrace a portfolio approach, treating the risk of failure on any single investment as a feature, not a bug.
- Recognize that scale can be achieved through many paths—including adoption by governments and large businesses, not solely the organization that developed the innovation.
- Keep evidence and learning at the forefront. Innovations were more likely to reach more than a million people if they had prior empirical evidence of impact and active researcher involvement, so fund rigorous testing of promising innovations and learn from those that fall short.
In its early years, DIV was sometimes criticized for being too siloed and struggling to achieve take-up of its hit investments. But, more recently, DIV was at the forefront of efforts to improve the cost-effectiveness of USAID’s programming. The goal of integrating lessons about what works into programming and scaling programs that deliver big impact per dollar is one we hope to see the State Department embrace.
As longtime fans, we’re excited that this approach lives on. Outside of government, we are optimistic that DIV Fund’s investments will continue to help identify interventions and provide valuable insights that can increase the impact of US government assistance. Given the administration and Capitol Hill’s expressed interest in innovation, we hope they’ll listen to what emerges from the DIV Fund’s evidence!
