Acumen (organization)

Acumen (formerly known as Acumen Fund)[1] is a non-profit impact investment fund with over 15 years’ experience in investing in social enterprises that serve low-income communities in developing countries across Sub-Saharan Africa, South Asia, Latin America, and the United States.[2][3] It aims to demonstrate that small amounts of philanthropic capital, combined with large doses of business acumen can result in thriving enterprises that serve vast numbers of the poor.[4] Over the years, Acumen has invested $115 million in 113 companies and has had a successful track record in sourcing and executing investment opportunities in the clean energy, health care and agriculture sectors.[5]

Acumen
Non-profit organization
FoundedApril 2001
FounderJacqueline Novogratz
Headquarters
New York City 
,
United States of America 
Revenue30,363,773 US dollar (2010) 
Websitewww.acumen.org

Philosophy

Acumen's philosophy is that a bigger impact can be made on poverty by giving people the chance to earn their living by investing in goods, structure and human capital rather than straightforward philanthropy.[6] This vision evolves into investing in companies whose products and services enable the poor to transform their lives, people who have the ability to lead and ideas that innovate and accelerate solutions to poverty.[7]

History

Acumen was founded in 2001 by Jacqueline Novogratz who gave up her job in Investment Banking to work in International Development.[8] The idea of Acumen started from one of Novogratz's trip to Central Africa, back when she was still in the banking industry with Chase Bank[9] (formerly Chase Manhattan Bank), where she noticed that banks did not lend to poor people. Soon after, she quit her job, relocated to Rwanda and opened Duterimbere, the first micro-finance bank in the country. It started as a money-lending venture where it provided women with small loans to promote women's entrepreneurship at the grass-roots level with an aim to contribute to the income of low-income working women. Novogratz's biggest challenge was convincing women that it was an authentic venture alongside explaining the ways in which it could increase their income and pull them out of poverty. Her cause was strengthened when she got 3 women parliamentarians to back her project and it grew to 2000 members from five provinces in 11 districts across Rwanda.[10]

After Duterimbere, Novogratz wanted to do something bigger. At the apex of her imagination was an entity that would provide social enterprises with the tools to empower the working poor. In 2001, with help of Seed Capital from the Rockefeller Foundation, Cisco Systems Foundations and 3 individual philanthropists, she founded Acumen.[11] Acumen uses a business mechanism to fight poverty, investing in for-profit businesses that treat the poor as customers.[12]

Investment Model

Acumen's investment model is to invest as equity or debt in enterprises, either for-profit or non-profit organizations, that are serving Bottom of Pyramid Markets.[13] In choosing these organizations, Acumen focuses on companies working on one or more of the five portfolio areas namely water, healthcare, housing, energy and agriculture. It invests not only in the form of financial capital but also its human and knowledge capital through assistance in business areas including business strategy, planning and performance management.[14]

Innovative Companies:

At Acumen, investment is made in companies that statistically have the greatest chance at lowering poverty by manufacturing and subsequently selling goods or services. Those companies are provided the seed capital that maximizes their reach in order to get to the most poor people alongside providing the flexibility and security to grow their businesses.[15]

Human capital:

Acumen has developed a Global and Regional Fellows Program that provides individuals with the knowledge, guidance and practical techniques to drive social change in developing countries to eradicate poverty and build a more tolerant world.[16]

Impactful Ideas:

Acumen has a carefully coordinated way of measuring and evaluating ideas and how much they hit the target they set out to achieve. Aligning business priorities with impact priorities allows it to have social impact in the sector.[17]

Investments

WaterHealth International:

In 2004, Acumen invested in WaterHealth International, a for-profit organization that supplies clean water to the poor population in rural India, Ghana and the Philippines. Acumen partners with the International Finance Corporation of the World Bank and Dow Chemical Venture Fund to supply, people in rural areas of third world countries, clean supply of water alongside earning a substantial gross margin that keeps these hybrid enterprises thriving.[18]

PEG Africa: In 2017, Acumen invested in PEG Africa, the leading pay-as-you-go solar home system distribution company in West Africa. PEG Africa launched in Ghana in 2015, and today serves customers across Ghana, Côte d'Ivoire and Senegal, bringing affordable solar products to those who do not have access to the electrical grid.

Social Return on Investment

When investing in businesses, Acumen measures success in the number of lives reached in bottom of pyramid[19] markets. For them, success is correlated with the social change that occurs in people's lives. For example, when looking to invest in a company that makes and distributes anti-malarial bed nets, Acumen uses numbers to measure the social impact of this company. This means that the more number of anti-malarial bed nets manufactured and distributed, the more impact the company made. If a company builds toilets and shower facilities in urban slums and business districts, the success of this is measured by the number of times the toilet and shower facilities are used.[20]

Acumen measures the immediate output and considers it when looking for businesses to invest in. It doesn't go further in investigating whether these social changes is contributing to decrease in malaria or improvement in health and environment. Its former CEO, Brian Trelstad argues that the latter approach is complicated, expensive and impractical for emerging companies. Instead, Acumen measures between output and impact i.e. distribution of bed nets to reduction of malaria.[21]

Measurement in Venture Philanthropy

Pursuing Venture Philosophy, Acumen's Modus operandi[22] is investing in enterprises that are innovating with an intent to eradicate poverty, with a potential for growth and return on investment. Investment in companies pursuing these ideas would yield below-market financial returns and therefore the returns are pooled back into Acumen's financial resources for future investments alongside enabling the investments to stand on their own. These financial returns, although not substantial, are critical in pursuing the organization's objectives of supporting significant social impact. Another way Acumen measures growth is thorough the impact of venture philanthropy by investing in companies that have a sustainable business model while having the ability to support its operating expenses with operating revenues within a 5-7 year period. Another investment criteria that an organization is scrutinized with is the ability to have its product reach a million end customers within the same 5-7 year period.[23]

Grants

Bill and Melinda Gates Foundation:

  • In November 2015, the Bill and Melinda Gates Foundation granted over $2 million to Acumen to invest in Ethiopia's poultry market as a means to improve the lives of smallholder farmers.[24]
  • In November 2008, the foundation granted $2.6 million to Acumen to develop and produce a system to provide safe water to the world's poorest people by applying a human-centered approach to innovation and design.[25]
  • In November 2008, the foundation granted $6.7 million to Acumen to support its mission of providing agriculture inputs to smallholder farmers to better the lives of poor farmer families[26]
  • In January 2006, the foundation granted $4.2 million to Acumen to support its mission of providing safe water and sanitation services on a fee for service basis.[27]

Cisco, Sapling Foundation

  • In 2005, Cisco Systems and Sapling Foundation matched donations up to a total of $1 million during the Clinton Global Initiative Inaugural meeting. It was used to deliver clean water, health and housing through investment in innovative, social entrepreneurs.[28]

Partnerships

The Clinton Foundation:

  • In 2015, Acumen, Unilever and the Clinton Guistra Enterprise Partnership, an initiative of the Clinton Foundation, launched an initiative called the Enhanced Livelihood Investment Initiative to improve the lives of farmers and their communities in Africa, South Asia, Latin America and the Caribbean. Th initiative involves a 3-year, $10 Million commitment to improve the economic lives of farmers by creating and scaling up privately held companies which links the farmers to Unilever's global supply chain and distribution network. This increases the social and economic impact of these businesses alongside sustaining them.[29]

The challenges in this initiative involve difficulty in accessing and adopting beneficial agricultural innovations as well as the company's challenge in providing it and still remaining profitable. This partnership helps in overcoming these challenges by developing repeatable models to scale the adoption of agricultural innovations.[30]

Other projects

LifeSpring Hospitals:

LifeSpring hospitals is a joint venture of Acumen and Hindustan Latex Limited to provide women with a cheaper and accessible way of childbirth. It started in 2005 when Anant Kumar, CEO of HLL (now known as HLL Lifecare) travelled to hospitals to talk to women about family planning practices and contraceptive use. Kumar found out that most women were unsatisfied with the level of care at public hospitals, some were so frustrated that they would take out loans to finance visits to private facilities.[31] Kumar took the idea of opening a high-quality maternal care institution to low-income families in the sprawling Hyderabad urban slums. The concept involved provision of high quality pre and post natal health care services priced at 50-70% the price of private clinics. The concept was welcomed among the poor population and it was expanded to 9 hospitals in low-income areas by 2009. Its narrow specialization in maternal health care has been instrumental in lowering costs and increasing productivity in its locations. By limiting capital expenditures such as renting hospital buildings on multi year leases, outsourcing pharmacy and laboratory services and reducing the amount of machinery to only those necessary in performing a safe normal delivery, LifeSpring hospitals has brought the cost down to make it accessible to the poor population.[32] [33]

Through its process-driven model, LifeSpring has filled a void in the Indian healthcare landscape. Its developmental goals are to reduce maternal and child mortality while achieving financial sustainability. It ensures that more babies are born with qualified physicians rather than at home in high-risk situations. Additional income generated apart from deliveries is attributed to family planning services, consultation fees and rent from outsourced laboratory and pharmacy.[34]

Raising money for expansion

In December 2013, LifeSpring Hospitals decided to raise $3.2 million to fund its expansion plan and to set up another maternity home.[35]

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References
  1. A Manifesto. Acumen. Retrieved on 2018-03-10.
  2. "Acumen | Regions (Investments) -". Acumen. Retrieved 2019-01-30.
  3. Kristof, Nicholas (2009-12-23). "Opinion | A Most Meaningful Gift Idea". The New York Times. ISSN 0362-4331. Retrieved 2018-04-08.
  4. Ibrahim, Al-Noor (September 9, 2009). "Acumen Fund: Measurement in Venture Philanthropy (A)" (PDF). Harvard Business School Case Study. N9-310-011. Archived from the original (PDF) on April 4, 2018. Retrieved April 3, 2018.
  5. "24 Financial Ventures Changing the World Through Social Impact Investing". Causeartist. 2016-07-25. Retrieved 2018-04-08.
  6. "Acumen | About Acumen -". Acumen. Retrieved 2019-01-30.
  7. https://acumen.org/wp-content/uploads/2017/10/About-Acumen-One-Pager-Q2-2017.pdf
  8. International development
  9. Chase Bank
  10. "A Banker for the World: Jacqueline Novogratz of Acumen Fund". The New York Times. 2009-08-22. ISSN 0362-4331. Retrieved 2019-08-29.
  11. Novogratz, Jacqueline (2007). "Meeting Urgent Needs with Patient Capital". Innovations: Technology, Governance, Globalization. 2: 19–30. doi:10.1162/itgg.2007.2.1-2.19.
  12. "A Banker for the World: Jacqueline Novogratz of Acumen Fund". The New York Times. 2009-08-22. ISSN 0362-4331. Retrieved 2019-02-06.
  13. "Bottom Of The Pyramid (Bop) Definition from Financial Times Lexicon". lexicon.ft.com. Archived from the original on 2017-05-05. Retrieved 2019-02-06.
  14. "Archived copy" (PDF). Archived from the original (PDF) on 2018-04-04. Retrieved 2018-04-03.CS1 maint: archived copy as title (link)
  15. https://acumen.org/wp-content/uploads/2017/10/About-Acumen-One-Pager-Q2-2017.pdf
  16. https://acumen.org/wp-content/uploads/2017/10/About-Acumen-One-Pager-Q2-2017.pdf
  17. https://acumen.org/wp-content/uploads/2017/10/About-Acumen-One-Pager-Q2-2017.pdf
  18. http://www.nuovavista.com/SharedValuePorterHarvardBusinessReview.PDF
  19. Bottom of the pyramid
  20. http://givingtogether.org/resources/Documents/2016%20Documents/2016%20-%20Let's%20Be%20Real%20About%20Measuring%20Impact.pdf%5B%5D
  21. http://givingtogether.org/resources/Documents/2016%20Documents/2016%20-%20Let's%20Be%20Real%20About%20Measuring%20Impact.pdf%5B%5D
  22. Modus operandi
  23. "Archived copy" (PDF). Archived from the original (PDF) on 2018-04-04. Retrieved 2018-04-03.CS1 maint: archived copy as title (link)
  24. "OPP1132892". Bill & Melinda Gates Foundation. Retrieved 2019-02-06.
  25. "OPP51035". Bill & Melinda Gates Foundation. Retrieved 2019-02-06.
  26. "OPP50888". Bill & Melinda Gates Foundation. Retrieved 2019-02-06.
  27. "OPP40584". Bill & Melinda Gates Foundation. Retrieved 2019-02-06.
  28. "Matching Contributions to the Acumen Fund". Clinton Foundation. Retrieved 2019-02-06.
  29. "Unilever, Acumen, and the Clinton Giustra Enterprise Partnership announce USD $10 million Clinton Global Initiative Commitment to Action to support smallholder farmers". Clinton Foundation. Retrieved 2019-02-06.
  30. "Unilever, Acumen, and the Clinton Giustra Enterprise Partnership announce USD $10 million Clinton Global Initiative Commitment to Action to support smallholder farmers". Clinton Foundation. Retrieved 2019-02-06.
  31. Scholl, Jessica (2013). "Inclusive Business Models as a Key Driver for Social Innovation". Social Innovation. pp. 99–109. doi:10.1007/978-3-642-36540-9_9. ISBN 978-3-642-36539-3.
  32. Economics, Health; Asia-Pacific; India. "LifeSpring Hospitals: Providing Affordable, Quality Maternity Care to India's Middle Class". Knowledge@Wharton. Retrieved 2019-02-06.
  33. https://www.businesscalltoaction.org/wp-content/files_mf/bctalifespringcasestudy.forweb29.pdf
  34. https://www.businesscalltoaction.org/wp-content/files_mf/bctalifespringcasestudy.forweb29.pdf
  35. "Acumen-backed LifeSpring Hospitals to raise $3.2M for expansion". VCCircle. 2013-12-06. Retrieved 2019-02-06.
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