Acumen’s New Model for Third-World Aid
Monday, November 13, 2006
Acumen’s founder is Jacqueline Novogratz, a former banker with an infectious magnetism and a melodic voice that delivers a constant call to action. Under her leadership, the fund manages $20 million in investments that fall within three portfolios: health, water, and housing. But Acumen’s goal is far larger than successful companies. Says Novogratz: “We’re creating an overall design for how you provide goods and services to poor people.” Travel northeast out of New Delhi, and long after the paved roads have given way to dirt, you’ll reach Thathia, a tiny village in Kannauj. Tucked away beside the sacred waters of the Ganges, it’s an impoverished rural district in one of the poorest states of India, Uttar Pradesh. Less than 20% of people read. Infant mortality is nearly the highest in the country. Disease is rampant.
There, if it’s not Sunday, chances are that Garima Devi will be seated, with her hair tied back, behind a computer at a wooden table in a concrete house marked “Drishtee Telekiosk.” There may be a line, as people walk many miles to talk to her. I need a loan because my sugar cane crop failed, someone will say. My husband has died, and the government pension never came. My son lost his job; can he get computer training? Devi, who is 21, listens, then logs on to her computer and goes to work.
Devi is neither social worker nor missionary. She’s an upwardly mobile career woman. Think of her kiosk as the local Kinko’s franchise. She owns the computer and the table it sits on. She charges 10 rupees to 25 rupees?about 20? to 50??per transaction. She keeps up to 65% of the profits. This lets her support her parents and her school-age little brother. By Kannauj standards, it’s a good living. A portion of the remainder goes to Drishtee.com, the Indian tech startup that provides her Internet connection and regular maintenance. Drishtee, which means “vision” in Hindi, is, in turn, partly financed by the Acumen Fund.
Acumen is a leader in the fast-emerging hybrid sector that straddles private industry and nonprofits. Technically a nonprofit, it invests in enterprises in developing countries with the strategy and discipline of a Silicon Valley venture-capital firm.
Acumen’s founder is Jacqueline Novogratz, a former banker with an infectious magnetism and a melodic voice that delivers a constant call to action. Under her leadership, the fund manages $20 million in investments that fall within three portfolios: health, water, and housing. But Acumen’s goal is far larger than successful companies. Says Novogratz: “We’re creating an overall design for how you provide goods and services to poor people.”
Novogratz has the type of disarming charisma that draws you in immediately, and indeed she has a vast global network of advisers, donors, and well-wishers. Acumen counts among its advisers Cisco Systems’ (CSCO) head of philanthropy Tae Yoo; the Bill & Melinda Gates Foundation’s Louis Boorstin; former U.S. Senator Bill Bradley; Chris Anderson, chairman of TED Conferences; and marketing maven Seth Godin. Major donors include Google.org, Google’s (GOOG) philanthropic arm, and the Bill & Melinda Gates Foundation.
Lack of money is no longer the major hindrance to solving many of the world’s most intractable social problems. Philanthropists such as Bill Gates, Warren Buffett, Richard Branson, and Joan Kroc now make gifts in the billions. Charitable giving overall has jumped 23% in the past four years. And there’s growing interest among investors eager to fund for-profit businesses that have both social and economic impact.
Rather, there’s a paucity of creative ideas. “It’s all about innovation,” says CEO Tim Brown of Ideo, who advises Acumen. “The money is there, but the solutions aren’t. Designers can contribute. We’re pretty good at taking a bunch of disparate components and figuring out the solution.”
Beyond the success of Acumen companies, Novogratz is creating a laboratory to design new business models. Much of the philosophy is drawn from University of Michigan economics professor C.K. Prahalad, whose bottom-of-the-pyramid theory holds that there’s great untapped market potential among the 4 billion people, more than half the world’s population, who make less than $2 a day.
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