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Monday, December 1, 2008

Reflections on Acumen Fund's Investor Gathering

By Rob Katz

Acumen Fund Investor GatheringLike the year before, it was cold, it was early and it was at the Rubin Museum of Art. But that?s where the 2008 Acumen Fund Investor Gathering ceased to be like the 2007 version, at least on the surface.

On a personal, micro level, there were obvious differences: last year, I attended representing my then-boss, an Acumen Fund advisor; this year, I am an Acumen Fund employee. To be sure, the change in vantage point (from audience member to staff member) accounts for some of the differences I observed between IG 2007 and IG 2008. With a little time and distance, however, I?ve decided that substantive changes ? in Acumen Fund?s world and the global community at large ? account for the bulk of year to year differences.

From November 2007 to November 2008:
  • The global financial system experienced turmoil unlike any in our lifetimes, precipitating massive asset devaluations worldwide;
  • Kenya went through a period of post-election violence that it is still working to recover from socially, politically and economically;
  • Pakistan struggled to fight terrorism, saw its former president assassinated and watched as its military ruler peacefully ceded power to a democratically-elected government;
  • India continued to boom, saw income inequality explode, and experienced its own 9/11 moment when terrorists attacked multiple sites in Mumbai;
  • The United States? housing market meltdown precipitated a global recession; amidst economic turmoil, the country elected a new president.
To be sure, the challenges facing Acumen Fund and our community are arguably as great as they have ever been. Fortunately, and if last year is any indication, it appears that we are prepared to face them head on.

How prepared? Here are some notes from the Investor Gathering, outlining how Acumen Fund has continued to invest in businesses serving low-income customers, and how we plan to ramp up our work again in 2009.

Brian TrelstadAfter breakfast ? and a state-of-the-state address by Jacqueline Novogratz, which she covers in her autumn update ? Brian Trelstad gave the audience a thorough update on Acumen Fund?s portfolio. Acumen now has 33 investments under management, as well as 5 exited investments, meaning we?re beginning to learn more and more about housing, drip irrigation, anti-malarial drugs, LED lights, health clinics, ambulance services, clean drinking water ? the list goes on ? and that?s Brian?s point.

He argues that we are indeed providing patient capital for impatient people ? and growing a social dividend in the process ? but he doesn?t shy away from tough questions:
  • How should Acumen Fund reach down the income ladder?
  • Can we work to scale the companies in our investment portfolio more quickly?
  • Where is the market compatible with philanthropy and where isn?t it?
  • Can we use the lessons we?re learning to influence policy around energy, food and other major issues?
It?s encouraging to see how Acumen Fund?s portfolio has grown over the past 5 years ? from $3.5 million under management to more than $41 million as of early November. What?s more, the work we?ve done in health has led to a new push on nutrition; similarly, our growing water and sanitation portfolio has led to an expanded effort to find investments in agriculture.

Successful investments are great, but Brian argues that, as social investors, we need to be just as rigorous in measuring how these companies impact people?s lives. The financial and social metrics Acumen tracks ? quarterly ? from all its investments allow him to quote an astonishing figure: the ten top-performing companies in Acumen Fund?s portfolio have impacted more than 36 million lives to date. (For more on what all that means, check out Brian?s article on social impact metrics (PDF) from the Innovations Journal.)

In 2009, Brian foresees more competition from commercial funds and strategic investors interested in the base of the pyramid, but less focused on social impact. Acumen will also likely get pushed by foundations and social entrepreneurs who are creating lots of social impact and but less financial impact. Can we toe this thin line?

Yes we can, Brian argues (drawing laughs from the politically aware crowd). It will take a sharper investment focus, a better understanding of what business models work and what we look for in an entrepreneur. It will require a focus on the poor ? which means early-stage conversations with our investees about exactly how their business model serves those making a few dollars a day.

Operationally, this means that 2009 will see Acumen Fund focus more than ever on management support. Brian promises to do a better job of plugging our community into these problems, as we are lucky to have supporters with real-world experience and a willingness to go above and beyond to help.

Ann MacDougall, Acumen Fund?s Chief Administrative Officer and General Counsel ? follows Brian. Her talk ? a major change from 2007 ? is entitled "Staying the Course in Troubled Waters."

We?re looking hard at costs, Ann says, in light of the financial crisis. She tells the crowd that Acumen is pushing for more efficiency, increased use of technology and most importantly, honing our energy, passion, and creativity to do more with less.

Following Ann and Brian are updates from the individual portfolio managers ? Energy, Water and Health ? explaining some of last year?s investments and what they mean for 2009.

In energy, Acumen Fund is working with one company whose biggest challenge is marketing, distribution and logistics; another uses long-proven technology ? their competitive advantage is using that technology to serve the base of the pyramid.

In water, Acumen?s investments in drip irrigation are working with some of the 800 million small holder farmers in the world. Believe it or not, a simple drip irrigation system can help a 5-acre farmer double his income in less than a year ? which is the most effective way to keep families together, to stem rural-urban migration and to allow people to make choices about how they feed, clothe, house and educate their children. Powerful.

The health report focuses on nutrition ? specifically, in a newly-approved investment that will sell fortified breakfast foods in East Africa. Today, you?ll pay about $0.60 for a standard (non-nutritious) breakfast in Nairobi or Dar es Salaam; the product Acumen Fund?s investing in will retail at around $0.20, and provide a full complement of vitamins and minerals.

AF IG - Lifespring panelThroughout the day, we hear more stories and more updates ? from India, Pakistan, East Africa as well as from former Acumen Fund Fellows and the since-departed class of 2009. A panel discussion featured the CEO of Lifespring ? a chain of low-cost maternal and child healthcare hospitals that?s growing fast in India ? with the backdrop of irresistible baby pictures.

At the end of the day, there were certainly differences between Investor Gathering 2007 and Investor Gathering 2008. Political and economic turmoil can dictate the agenda more than you might otherwise want it to. However, despite all of 2008?s upheaval, the Investor Gathering remained a hopeful, pragmatic assessment of Acumen Fund?s work this year and down the line.
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