IGNIA Fund, a Mexican VC firm targeting social entrepreneurship, has closed its first fund. The company raised $20.6 million in a round led by eBay founder Pierre Omidyar's Omidyar Network. Managing Partner Alvaro Rodriguez Arregui hopes to increase the size of the fund to $75 million by the end of the summer. What's significant about the IGNIA Fund, as well as a separate $17 million fund raised for social entrepreneurship in India in February, is its mandate to pursue investments that most traditional VC firms only say they intend to pursue - those that stake companies with market growth potential based around direct social impact. The IGNIA Fund will invest in companies that serve what Arregui calls "the base of the pyramid." The fund operates from two guiding principles. First, the significant market opportunity in the developing world presents a range of unmet demands for essential products. The developing world is, according to the company's website, a "severely underserved," "large cash market," that is "insulated from the current industry leaders." At the risk of sounding ignorant, low-income individuals in the developing often lack the essential goods and services that we take for granted, though not for lack of demand. IGNIA argues that 360 million out of the 550 million people living in Latin America exist on less than $3,000 per year, while at least 20 million live at or below the poverty line. The private sector opportunity for delivering lasting, scalable solutions to these individuals is clear. All the better if the funded companies are working in their product markets, though this shouldn't be a hard and fast rule. I can hear investors rushing to the doors now. What about contract and property rights protection, transaction costs, and corruption? Well, the short answer is that this isn't the U.S. in the 1880s. The longer answer is that these institutions are largely developed, though it's possible worthwhile opportunities for adhering to them may not have presented themselves. For an explanation, see here. So why, then, do VCs - who are known for the risky investments in new, potentially flawed technologies - generally avoid the risky developing world? One answer may be that the investment opportunities are too small. Arregui plans to commit between $2 million and $10 million in his portfolio companies, with seed investments starting at $500,000. Another may be that the potential investments may not be as high tech as some VCs would prefer. But then, who doesn't love a little capital efficiency from time to time. In terms of greentech, the developing world is rife with potential. Rural electrification through distributed generation may be a good place to start. Water purification and desalination technologies would be too. Come to think of, refrigeration, building materials, biofuels, energy storage, and efficient vehicles all have significant market opportunity in developing countries. Does this sound familiar?