Non-Profit Venture Capital Aids Developing Nations

Acumen Fund is a global non-profit venture capital fund based in New York City. Acumen was founded in 2001 by Jacqueline Novogratz, who previously founded and directed The …

Acumen Fund is a global non-profit venture capital fund based in New York City. Acumen was founded in 2001 by Jacqueline Novogratz, who previously founded and directed The Philanthropy Workshop and The Next Generation Leadership program with the Rockefeller Foundation. Through her work with these programs she gained exposure to high net worth individuals who were looking for strategic philanthropy and socially responsible investment opportunities. As a result, she decided to start Acumen Fund. Acumen invests philanthropic capital in business ventures designed to have a social impact in developing countries.

Acumen Fund focuses on distinct geographical regions and social sectors. At the moment, they work with enterprises in India, Pakistan, East Africa and South Africa, and focus on businesses catering to needs associated with energy, health, housing and water.

“The social impact piece is that all of the enterprises in which we invest are working to deliver very critical goods and services to the poor, but they’re doing so in a market-based or business-oriented approach,” Mariko Tada, Acumen Fund’s knowledge and communications manager, said.

Businesses being considered for Acumen’s philanthropic investments are subject to a thorough due diligence process. It is important that the project is within one of the regions in which Acumen is active and that it falls into one of the four social sectors. Acumen Fund also offers intensive management support to the businesses with which it works, which can mean anything from helping a new enterprise hash out a business plan to working with an existing company to target low-income consumers.

“I think it’s probably very similar to a typical venture capital firm’s model in terms of the long due diligence and the understanding of the business model,” Tada said.

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One of the projects with which Acumen Fund is involved is a pharmaceutical company called The Medicine Shoppe. The company has locations across the globe, but Acumen specifically works with them in India. There are already several locations in middle-class neighborhoods in the country, but now The Medicine Shoppe is interested in focusing on low-income areas and consumers, according to Tada.

“They…provide a health clinic as well so people can come see a healthcare provider and be provided with a prescription, if needed, to a low-cost generic drug that they can then access right at the store,” Tada said. “It sounds really simple, but in those areas they’ve never had that access.”

Investors interested in getting involved should be aware that putting money into Acumen Fund is a donation, not an investment; that being said, these donations help entrepreneurs improve the quality of life for millions of underprivileged people in the world. The fact that projects are structured as investments instead of charity means that every dollar goes further, and keeps both Acumen and the companies involved more accountable. (For information about more charities that use donations effectively, see our previous article on the Top 15 Charities for Investors for 2007.)

Although most contributors allow Acumen to make the ultimate decision about where their money is most needed, donors are able to specify a sector—energy, health, housing or water—that is of particular concern to them, if they so choose.

Acumen Fund puts out a quarterly newsletter in which it updates contributors on the progress of current projects and can provide more customized information for organizations or individual donors who have specific reporting requirements, according to Tada.

Since Acumen is a non-profit, it does not necessarily reap high returns on its investments. “We do get the return of our capital, we don’t necessarily get a return on our capital,” Tada said. “Because the management support we provide is also pretty intensive, our costs to invest are probably not covered by any returns that we get.” Tada said that some of Acumen’s current investments, particularly its equity investments, have the potential for greater returns in the future. Any returns that might be gained from Acumen’s investments are rolled into new investments.

Investors can get involved with Acumen Fund as easily as making an anonymous $25 donation online. But “unlike CARE or one of those larger institutions, where their donations are made up of millions and millions of people donating $25, we have a much different fundraising structure; I think primarily because of our size. We are really lucky to have this community of investors, or partners, who donate starting at about…$10,000 a year to a number who have pledged $5 million,” Tada said. “We do get lots of people sending much smaller checks than $10,000.”

Acumen Fund also has a successful Fellows program, in which eight to 10 young professionals spend several months training at the New York City office before traveling to focus regions and working with some of the enterprises in person. There are also opportunities to assist with events, and many professionals contribute by doing “discrete projects” for Acumen, according to Tada.

Further information on Acumen Fund can be found via the organization’s website and blog.


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