When Jacqueline Novogratz appeared on the cover of Forbes magazine last December along with an article entitled Can Venture Capital Save The World?, it was a breakthrough moment for those in the impact investment/patient capital/social finance – however you’d like to call it – space. After all, the magazine is known for its list of richest Americans and billionaires coupled with the motto The Capitalist Tool. Instead, the December issue featured a woman who is leading an organization to solve the problems of poverty. Now 10 years since inception, Acumen Fund has been investing in developing markets and gaining momentum across the world. Last week in Canada, their local Seed Chapter Toronto for Acumen held an Acumen 101 session for a group of young professionals intrigued by the developments in this field.
The event was held at the Centre for Social Innovation. Toronto for Acumen is one of 15 Chapters run by local volunteers to increase awareness and excitement for what Acumen Fund calls patient capital.
The session provided insights on the Acumen Fund model. It highlighted the 10 things they learned about tackling poverty and focused on #2: Neither grants nor markets alone will solve the problems of poverty. On the one hand, traditional aid tends to lack a feedback loop that takes into account the voice of the customer. On the other hand, traditional venture capital puts investors’ demand first, not the customer. Acumen Fund uses a patient capital model that invests donor money in equity or debt for a period of 8 to 15 years on solutions that will eventually become financially sustainable.
Acumen Fund has four investment criteria:
1) Strong Leadership
2) Scalability
3) Financial Sustainability
4) Social Impact
Scalability reflects Acumen Fund’s desire to make large impact investments that reach over 1 million end users within 5 years. Companies also have to show the potential to cover operating expenses with revenue within a period of 5 to 7 years. In terms of social impact, Acumen Fund is essentially looking for “game changers” – those who can make a product or deliver a service that addresses a critical need for the bottom of the pyramid more favorably than anything currently available.
Other than providing an overview of Acumen Fund, the session generated some questions from the attendees. Some wondered what role governments play with regards to solutions for the vulnerable. One of Acumen Fund’s investments Ziqitza Health Care Limited provides a 24-hour ambulance service in India by dialing 1298. The plans were to get a number more easily remembered such as 911 or 999, but this option literally came at a cost. There is often disconnect between agencies and the people they serve.
Others wondered how Acumen Fund measures social impact. In reality, it is generally easy to measure the outputs – how many malaria nets distributed – but it is difficult to measure the outcomes – the degree to which people are better off as a result of those nets.
Acumen Fund has established presence in developing markets yet the presence remains less for regions such as North America. These are untapped markets since poverty can be seen in the most unexpected places. Acumen Fund Chapters are paving the way for investment at a local level. In Canada, immigrants and Aboriginals are seen as most vulnerable to poverty and with that comes Acumen Fund’s interest in exploring the possibility of a North American portfolio.