Acumen Fund helping improve lives through investments
Allison Woodman
Issue date: 12/4/07 Section: Inside Ross
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With a proven record of success since its inception in 2001, the Acumen Fund has recently been attracting more and more large donors such as the 'Bill and Melinda Gates Foundation' and 'Google.org.' Such providers of philanthropic capital have approached the not-for-profit fund with millions of dollars in support of Acumen's mission-to use entrepreneurial approaches to solve the problem of global poverty. Through the application of a rigorous framework derived from the venture capital industry, this social venture capital fund has emerged as a leader in its domain. The current $27million portfolio under Acumen's management spans five countries (South Africa, Tanzania, Kenya, India, and Pakistan) and fours sectors (health, housing, water, and energy).
Brian Trelstad, the Chief Investment Officer of the Acumen Fund, visited Ross this past Thursday and Friday to speak about Acumen's business model, which helps entrepreneurs deliver critical goods and services to the base of the pyramid (BoP) consumers, generally defined as the four billion people, or two-thirds of the world's population, that earn less than four dollars a day.
The Acumen Fund's model is a market-based approach that is changing the traditional view of development organizations. To focus on more sustainable solutions for poverty alleviation, the Fund moved away from providing grants in 2003. While Acumen recognizes the role and need for this short-term focused funding, it sometimes makes small equity investments in the form of convertible notes for high potential research and development opportunities. Acumen mainly focuses on debt investments that tend to be around one million dollars each. Expected return on investments, though not a hurdle rate, is eight to ten percent, and the payback period is five to seven years.
Acumen generally takes a minority stake in the BoP enterprise and mitigates risk through due diligence, significant business training for the local entrepreneurs, and continued managerial support of the ventures. The Acumen fund manager reviews financial and other metrics with investee companies on a regular basis. Capital, once paid back by the investee, is not returned to those who donate to Acumen, and instead it is reinvested in other ventures.
Brian Trelstad, the Chief Investment Officer of the Acumen Fund, visited Ross this past Thursday and Friday to speak about Acumen's business model, which helps entrepreneurs deliver critical goods and services to the base of the pyramid (BoP) consumers, generally defined as the four billion people, or two-thirds of the world's population, that earn less than four dollars a day.
The Acumen Fund's model is a market-based approach that is changing the traditional view of development organizations. To focus on more sustainable solutions for poverty alleviation, the Fund moved away from providing grants in 2003. While Acumen recognizes the role and need for this short-term focused funding, it sometimes makes small equity investments in the form of convertible notes for high potential research and development opportunities. Acumen mainly focuses on debt investments that tend to be around one million dollars each. Expected return on investments, though not a hurdle rate, is eight to ten percent, and the payback period is five to seven years.
Acumen generally takes a minority stake in the BoP enterprise and mitigates risk through due diligence, significant business training for the local entrepreneurs, and continued managerial support of the ventures. The Acumen fund manager reviews financial and other metrics with investee companies on a regular basis. Capital, once paid back by the investee, is not returned to those who donate to Acumen, and instead it is reinvested in other ventures.
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