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February 21st, 2017

Acumen Fund's model of Social Investment

Acumen Fund was created in 2001 to offer new approaches to social impact investing, acting as an intermediary between philanthropic organisations and social enterprises. It developed a theory of "patient capitalism", which provides early-stage social enterprises with significant funding and then helps nurture their development. The ultimate objective is to provide low-income consumers with essential goods and services in areas such as healthcare, where it has invested, for example, in a company making antimalarial bed nets and in an enterprise running low-cost maternity hospitals.

The initiative

In the US, the concept of social impact investing is well known and has been around for some time; the Acumen Fund's concept of "patient capitalism" is less widely used, but its principles have informed the Fund from its creation at the turn of the century.  “Acumen was incorporated on April 1, 2001, with seed capital from the Rockefeller Foundation, Cisco Systems Foundation and three individual philanthropists promoting 'patient capitalism'."[2]

It is necessary to understand Acumen's definition of patient capitalism in order to understand their approach. “For Acumen, patient capital is understood as a debt or equity investment in an early-stage enterprise providing low-income consumers with access to healthcare, water, housing, alternative energy, or agricultural inputs... The patient capital Acumen provides is accompanied by a wide range of management support services nurturing the company to scale.”[3]

The Acumen Fund's goal is "to change the way the world tackles poverty by investing in companies, leaders, and ideas".[4] As a result, it can:

"Influence traditional charity by moving from a top-down approach towards one that's bottom-up

"Approach low-income people as part of the solution, seeing investment as an important tool for change, and insisting on stronger metrics of accountability.”[5]

Acumen seeks a close partnership with the philanthropists often referred to as "donors" and the beneficiaries of that philanthropy, emphasising the active role that all parties take in their projects. “Thus, the organization wouldn't simply make grants, but would invest in entrepreneurs who had the capability to bring sustainable solutions to big problems of poverty. They would create a venture capital fund for the poor, supported by a global community of philanthropists willing to take a bet on a new approach. Donors are called 'Partners' and are treated like investors because the approach would be to invest together in long-term change.”[6]

Seen from the outside, Acumen has a distinct personality. "Acumen is an odd mix of charity and traditional investment fund. It takes donations from philanthropists in the usual fashion, but then invests them in a businesslike way, by lending to or taking stakes in firms. The recipients — private ventures aiming for profits — must serve the poor in a way that brings broader social benefits.”[7]

The challenge

Recent years have seen a growth in the popularity of social impact investing. “The markets alone cannot solve the problems of poverty; nor are charity and aid enough to tackle the challenges faced by over two-thirds of the world’s population living in poverty. Patient capital is a third way that seeks to bridge the gap between the efficiency and scale of market-based approaches and the social impact of pure philanthropy.”[1]

The public impact

Since its inception in 2001, "Acumen has invested more than USD82 million in 73 companies around the world".[8] This resulted in the Fund's rapid growth. “By the end of 2006, it had approximately USD20 million under management in 17 social enterprises, impacting close to 10 million lives at the base of the pyramid, or those making less than USD4 a day.”[9]

This has then led to a wide range of positive relationships with individuals and collective organisations:

  • “Since 2006, we have received more than 5,000 applications from 110 countries and trained 97 Fellows from over 25 countries. After the Fellowship year, Fellows continue to create social change, with 85% of the Fellows currently in leadership positions at socially progressive organisations such as, Endeavor, Bamboo Finance, New Island Capital, Omidyar Network, MercyCorp, Gates Foundation, Andela and Silatech.”[10]
  • “Acumen is working with 92 companies providing choice not charity; USD101 million invested in breakthrough innovations; 58,000 jobs created and supported - improving livelihoods and economies; 189 million lives impacted with dignity, and not dependence.”[11]

Stakeholder engagement

The fund has many stakeholders - partners, who provide funds, and social enterprises with whom the organisation works for community development programmes. Two important foundations were involved in its initial funding along with philanthropic individuals: “Acumen was incorporated with seed capital from the Rockefeller Foundation, Cisco Systems Foundation and three individual philanthropists.”[12] Its "Acumen Fund Stewards" are the Bill & Melinda Gates Foundation, the Robert & Kate Niehaus Foundation and Unilever.

The range of its stakeholders now extends well beyond the US to encompass the entire world. “Acumen Partners are a global community of individuals and institutions helping to solve the world's toughest problems. Our Partners come from more than 20 countries around the world and include private individuals, family foundations, corporate partners, institutional supporters, and entrepreneurs. We build strong networks of Partners in the regions [where] we work, as we believe that having local support is an essential part of our model. Our Partners play an integral role in the organisation, and we value the expertise and perspective that they bring to the table.”[13]

Political commitment

Social impact organisations do not necessarily have direct relationships with political entities, and the Acumen Fund creates relationships with philanthropic individuals and organisations rather than with governments. However, Acumen has a presence in six regions around the world (America, India, Pakistan, East Africa, West Africa and Latin America, with offices in New York City, Mumbai, Karachi, Nairobi and Accra). The organisation receives significant support from its funding partners, and focuses on developing local partnerships with social enterprises, as it believes that having local support is essential to its model. The founder of Acumen, Jacqueline Novogratz, has addressed organisations UNICEF, and has strong links with international aid institutions.[14]

Public confidence

The impact numbers (see Public impact above) suggest that Acumen is popular with the social enterprises it partners with, and there are many instances of successful initiatives that bring employment to low-income areas of the world. "In India, Drishtee runs a network of internet kiosks in rural areas, while LifeSpring runs low-cost maternity hospitals. A to Z Textile Mills, a manufacturer of antimalarial bed nets, has grown to become one of Tanzania's largest employers."[15]

Clarity of objectives

The objectives are well defined and target relevant issues. Acumen has consistently worked towards achieving its objectives to grow and develop the businesses they invest in. “Their aim in investing patient capital is not to seek high returns, but rather to jump-start the creation of enterprises that improve the ability of the poor to live with dignity.”[16]

Acumen has focused on the middle ground of social investment that lies between microfinance and high-end commercial lending. “To deal with its high management costs, Acumen shifted towards making larger investments, ranging from USD500,000 to USD3 million. The fund believes that this approach fills the gap between microfinance (up to USD10,000) and commercial financing (often USD2,000,000 or more) found in developing countries. 'Most financiers will not touch these investments,' says Nthenya Mule, Acumen's former East Africa manager. 'We're willing to walk with the entrepreneurs as they grow and develop.'... Following the closing of an investment, Acumen's focus shifts to defining metrics that measure social impact and to identifying a business's weaknesses. The idea is to 'set the bar high with strict goals, while providing the management support to help these enterprises achieve their objectives'.”[17]

Strength of evidence

Before founding Acumen, Jennifer Novogratz had experience of working for Chase Manhattan Bank, the African Development Bank (AfDB) and the Rockefeller Foundation. “The idea for Acumen crystallised in 1999 while Novogratz was leading a workshop with the Rockefeller Foundation for wealthy individuals on effective philanthropy in Washington, DC. Novogratz’s past experiences at Chase, the AfDB, and the Rwandan non-profit microfinance organisation, Duterimbere, had given her strong opinions about the power of the market and the limitations of charity and aid. She was convinced that a third way was possible — one that combined the discipline of the market and the ethical motivations of charity... After the workshop, Novogratz pitched the SVC [social venture capital] model to her boss, Sir Gordon Conway, then president of Rockefeller Foundation. Conway was particularly interested in how Acumen would differentiate itself from foundations. Convinced of the model’s merits, the Rockefeller Foundation along with Cisco Systems Foundation and three Silicon Valley philanthropists committed USD8 million in seed funding.”[18]


Acumen Fund's financial feasibility has been built on the initial seed funding from wealthy philanthropic foundations and Silicon Valley entrepreneurs (see The initiative above). This has been reinforced by the numerous donors at different levels of giving: from the Acumen Fund Stewards at USD5,000,000+ (see Stakeholder engagement) to the development partners at USD10,000+.


Acumen's founder has put in place an experienced management team within a sound governance structure. “Acumen has a Board of Directors, an Advisory Council, regional advisors and an investment committee. The patient capital Acumen provides is accompanied by a wide range of management support services nurturing the company to scale.”[19]

All of Acumen's potential investments undergo a process of scrutiny to determine whether they are socially, financially, operationally and legally viable. “Potential investments are identified through business plan submissions, referrals, or proactive research by our Portfolio team members. All investments go through an Initial Due Diligence process in which the potential investment opportunity is vetted and discussed by senior members of Acumen's Portfolio Leadership Team. For those investments that pass the initial deliberation stage, the team conducts a rigorous Formal Due Diligence process which entails a review of the promoter/enterprise in the general areas of: (1) social impact, (2) financial viability, (3) operations, (4) management, (5) accounting and (6) legal. Investment opportunities are then presented to the Investment Committee, which is responsible for leading a final discussion on the critical issues of the potential transaction and ultimately responsible for approval or rejection of investment opportunities.”[20]


Acumen Fund monitors its investments continuously, with its primary metric being the number of lives reached. “Acumen Fund is a venture philanthropy firm with a portfolio of over 75 investments in social enterprises in Africa and Asia. Its primary social metric is the number of lives reached in base-of-pyramid markets. This means that for a company that manufactures anti-malarial bed nets, Acumen will count the number of nets manufactured and distributed.”[21]

Acumen has participated in important initiatives to find new and more useful ways of identifying what social investment organisations should attempt to measure. “We co-developed the Impact Reporting and Investment Standards (IRIS) and helped to found both the Aspen Network for Development Entrepreneurs (ANDE) and the Global Impact Investment Network (GIIN). These breakthroughs in measurement have helped answer the question of 'what' we should measure, but they have had very little to say about 'how' to measure. This is the problem we are trying to solve. Our new approach, called Lean Data, was created to address the unique and diverse needs of social enterprises, and it's redefining what it means to align impact priorities with business priorities.”[22]

Acumen feels, therefore, that it is making significant progress on how to measure progress. “Lean Data is the application of lean experimentation principles to the collection and use of social performance data. It involves a shift in mindset away from reporting and compliance and towards creating value for a company and its customers. Lean Data uses low-cost technology to communicate directly with end customers, getting high-quality data quickly and efficiently.”[23]

This is because conventional approaches to measurement using performance indicators can be misleading. "Acumen accepts that the use of performance indicators can provide a false sense of precision. After all, how can one prove beyond doubt that a water filter prevented a child from falling sick? But it is possible to use the results achieved by charities in the same field as a benchmark. Thus Acumen insists that A to Z's bed nets must cost less than the USD10 that Malaria No More, a big traditional American charity, says it spends delivering each one it gives away."[24]


Acumen and its various stakeholders are working together to support investing in companies, leaders and ideas. “Our Partners play an integral role in the organisation, and we value the expertise and perspective that they bring to the table.”[25] The Fund also builds strong relationships in the social enterprises, such as LifeSpring in India and A to Z Textile Mills in Tanzania.

The Acumen portfolio team's due diligence process, which involves senior management in the decision-making, ensures that investment opportunities are thoroughly investigated in order to demonstrate that they are viable and consistent with the Fund's collaborative approach.


Acumen: Changing The Way The World Tackles Poverty, Acumen


Acumen Fund: How to Make the Greatest Impact, 22 April 2008, WDI Publishing, William Davidson Institute, University of Michigan


Acumen Makes Investments That Generate Both Social And Financial Returns: Investment Model, Acumen


Impact Investing: Market-Minded Development,Hima Batavia, Justin Chakma, Hassan Masum, and Peter Singer, Winter 2011, Stanford Social Innovation Review


Let's Be Realistic About Measuring Impact, Alnoor Ebrahim, 13 March 2013, Harvard Business Review


The patient capitalist, 21 May 2009, The Economist


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