[INTERVIEW] Acumen Fund Chats About Embracing Innovation
StayClassy Marketing Associate
Acumen is changing the way the world tackles poverty by investing in companies, leaders, and ideas. The organization is one of the early pioneers in the field of impact investing and its companies have improved the lives of millions of low-income people by providing them access to high-quality, affordable water, sanitation, housing, healthcare, energy, education, and agriculture services. Since 2001, Acumen has invested more than $87 million in 81 companies across South Asia and Africa.
How does Acumen identify companies to invest in?
We have offices in all of the regions we invest in: India, East and West Africa, Pakistan and Colombia. Deals are primarily identified through our country offices. The portfolio teams on the ground look for new deals that address one of the sectors we invest in: water, agriculture, health, education, housing and energy. It’s a mix between actively going out into the community and searching for companies, as well as receiving business plans and reviewing them. We leverage our network of existing companies, suppliers, advisors and partners in the region.
What are a few attributes Acumen believes an organization must have to be considered for investment?
First and for most, they must be a sustainable commercial business that has a strong social mission serving BoP customers embedded in the business model. We have eight criteria that guide us in thinking about whether a company is the right fit:
Be located in or have significant operation or impact in East Africa, West Africa, India, Pakistan or Latin America.
Operate in one of our investment sectors of Agriculture, Energy, Education, Health, Housing, or Water
3. INVESTMENT SIZE
Be seeking investment capital in the range of $0.25M-$3M, structured as either debt or equity.
Be an early-mid stage company that is in the process of scaling. We rarely invest in pure start-up companies.
5. POTENTIAL FOR SIGNIFICANT SOCIAL IMPACT
Make a product or deliver a service that addresses a critical need for the poor in our sectors and geographic focus. These products or services need to be economically better or create greater social impact than what is currently available on the market or through charitable distribution channels.
6. POTENTIAL FOR FINANCIAL SUSTAINABILITY
Have a clear business model that demonstrates the potential for financial sustainability within a five to seven year period; including the ability to cover operating expenses with operating revenues.
7. POTENTIAL TO ACHIEVE SCALE
Be able to demonstrate a clear path to scale the number of end users over the period of our investment and be positioned as one of the leading service providers in the market.
8. STRONG MANAGEMENT TEAM
Have a strong and experienced management team with the skills and will to execute the business plan with a clear and compelling vision. The management team is dedicated to serving low-income individuals and has unyielding ethics.
What do you consider some of the most innovative and forward-thinking initiatives at the moment?
Across the sectors we invest in, we’re seeing more and more businesses incorporate mobile technology into their operations or delivery of service. One example is Sproxil, a company that has developed a Mobile Product Authentication solution that enables consumers to verify that the pharmaceutical product they are buying is genuine. I was surprised to learn that up to 30% of medicines sold in developing countries are counterfeit or are substandard. Consumers use a scratch card, similar to those used to replenish cellular talk-time, to reveal a one-time-use code on pharmaceutical products. They then send the code via SMS to a “911 for fake drugs” number which is identical on all cellular networks within a country.
Another good example is m-kopa which is doing innovative pay-as-you go financing to deliver energy the way we would pay for our utility bills. M-KOPA’s innovative pay-per-use model allows customers to distribute payments for a three-light solar and radio/phone charging station over several months. Customers pay for the solar home system in installments via SMS on preexisting mobile money networks. By replacing a kerosene lamp with an M-KOPA financed solar product, a consumer can expect to save an entire year’s income within three years of owning the product.
Another exciting way mobile is being used is for impact assessment: In partnership with Grameen Foundation, India, a few of our companies – like Ziqitza Healtchare Limited – are calling customers’ mobile phones to conduct a short survey to assess their impact and improve service.
How can nonprofits, regardless of size or sector, foster a culture of innovation at their organization?
There are a couple things we do here that other companies could replicate. We host brown bag lunches with the Acumen team and thought leaders in politics, leadership, and social entrepreneurship. During these informal lunches, we exchange new ideas with innovative people working in the social change ecosystem. This often sparks ideas or leaves us with lessons learned that we can bring back to our own work.
Last year we launched +Acumen courses, free online courses that cover topics ranging from leadership, to design thinking to storytelling. Many Acumen employees form groups of 3-4 and take a course together. We learn more about each other personally and professionally, while gaining new skills along the way. These by the way are free and open for anyone to take! We are in the business of supporting innovative companies, ideas, and leaders.
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Images Courtesy of Acumen Fund