Learning From Our peers: Rob Katz from Acumen Fund

Editor’s Note: This is a combo post that merges a visit with Rob Katz at Acumen Fund’s NY offices a few months ago and a talk that he did at IDDS earlier this week. Rob is another one of my favorite bloggers.

Rob Katz

Van Jones of the Ella Baker Center for Human Rights gives the following advice to non-profits:

Steal! I don’t mean steal money. Steal ideas! Talk to other people who don’t work on your project. If you go to New York to see your friends or your parents, look up the other groups working in a similar area and say hello. If you can’t meet with the executive director, that’s good, because if the organization is more than five years old the executive director has no idea what’s going on anyways.

Talk to the program officer, the deputy director, the receptionist — and steal ideas. And grab onto people that you stole the ideas from. If you go overseas, make sure to visit some of the non-governmental organizations in other countries. It’s amazing how many problems have already been solved that you’re still stewing in and suffering through.

Sound advice. So while in NYC visiting my mom, I popped into Acumen’s offices to chat with Rob Katz to learn a bit more about Acumen, their processes and how they are similar and different to AIDG’s.

Outside Acumen Fund's New York Office
Outside Acumen Fund’s New York Office

 

Social Venture capital at the BOP: Acumen Fund in a nutshell

Duration: 41sec

Acumen Fund invests philanthropic capital in existing social ventures that serve the bottom of the pyramid. They focus primarily on enterprises in the water, health, housing, and energy sectors that are a few years old with a decent track record under their belt.

They got started in 2001 with seed capital from the Rockefeller Foundation, Cisco Systems Foundation and three different philanthropists. I’ve heard that their starting capital was $10 million, but I have to verify this figure. [In this way they are a bit like Athena, Greek goddess of wisdom and philosophy, who sprang forth fully formed out of the head of Zeus. ;)] To date they have raised $55 million from private individuals and foundations, with the goal of having an investment portfolio of $100 million.

Acumen’s General Process

  1. Enterprise Identification.
    Currently they do a mix of searching for qualified prospects (which is non-trivial work in the markets they specialize in) and sorting through pitches that come to them directly.
  2. Due Diligence and Investment.
    Acumen’s investments range from $250,000/$300,000 to a $1 million. They take the form of debt or equity with a payback period or exit in about five to seven years. By comparison, AIDG lends $10,000-$100,000. We’re more of an initial investor who also is involved in R&D, while Acumen engages in mezzanine financing. That said, Acumen does do some “lab investments” at the $50-60,000 level.

    Part of their long due diligence process involves analysis of the companies financial records, talks with customers and suppliers, a good hard look at the product line and the management team, a series of pro/devil’s advocate debates within Acumen, etc. Once a biz gets past that stage, an investment memo is prepared to lay out how much money will be involved, the debt vs. equity mix, payment terms, success and failure factors, financial projections and barriers.

    Distribution of investment capital
    Distribution of investment capital

    In 2/29/08, Acumen had $18 million under management and $13.3 million approved, but not distributed. The regional breakdown of investments under management was as follows: $10.7m in India, $3.3m in East Africa, $700,000 in Pakistan, and $3.1m spread in U.S/Egypt/Sri Lanka/South Africa. Sectors: water, health, housing, and energy. Currently funded enterprises (according to website): Scojo, 1298, Kerala First Health Services, Saiban, Kashf Foundation, d.light design, GEWP, Drishtee, Voxiva, Aqua Aero Water Systems BV, Lifespring, SHEF, Jamii Bora, ABE, A to Z Textile Mills, Broadreach, Books of Hope.

    Photography by Susan Meiselas (Magnum)

    Photography by Susan Meiselas (Magnum)
    Photography by Susan Meiselas (Magnum)

  3. Direct Involvement.
    Acumen take a direct role in the companies they invest in, for example by talking a seat on the board of directors. They also have a fellows program where, after 2 months intensive training in NYC, selected participants spend a year working in the field with an Acumen supported enterprise.
  4. Provision of managerial experience and access to business and government connection.
    An illustrative example: Tanzania’s A to Z Textile mills, the largest manufacturer of insecticide treated bednets in Africa, was previously a regular textile factory. The entrepreneur came to Acumen with an idea. He’d been getting multiple requests to make bednets in recent years from UN related organizations. Given the sudden demand, he was quite happy to shift production, but needed some help. So Acumen introduced A to Z to Sumitomo, the Japanese creator of slow-release insecticide treated bednets whose mosquito killing potential lasted 5 years compared to the normal 6-12 months. They helped broker a partnership with Exxon Mobil, normally so sketchy, but who donated resin, an important starting material, as part of their corporate social responsibility initiatives. Acumen also worked with higher ups at the UN and WHO to determine in they could guarantee a purchase of 4 million units. Now A to Z makes 20% of global bednets and provides 4000 jobs. Not too shabby.
  5. Sharing of failures and lessons learned.
    Working in the creating high-impact nonprofits mold, Acumen is working to develop our field of social innovation. They want to influence the sector as a whole, spreading the gospel.They are developing portfolio data management tools, social impact assessment frameworks, knowledge sharing partnerships and new investment vehicles. Acumen’s offices in NY are in the Google building and they are getting to take advantage of Google’s generous 80%-20% rule
    (Innovation Time off)
    .
  6. Re-investment of capital

Other Social Venture Funds:
Agora
Endeavor
Ignia
New Ventures
Technoserve
Small Enterprise Assistance Fund
E + Co
Care Enterprise Partners

Related Posts:
Updated Info on AIDG’s Programs
HBS Social Enterprise Conference: Panel 3 – Acumen Fund, Echoing Green and New Profit

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