Interview: Acumen Fund’s Sasha Dichter on trends to look for in

2011
By Tamara Schweitzer, January 25, 2011

As the director of business development at Acumen Fund, a global

venture fund that invests in entrepreneurial approaches to poverty, Sasha
Dichter has a firm grasp on the evolving discussion around capital for
social enterprise. A well-known blogger on the topic of philanthropy,
generosity, and social change, Dichter talked to Dowser about his
predictions for the coming year in social entrepreneurship, focusing on
new approaches to funding social enterprise, and why the sector needs a
universal metric system now more than ever.

Dowser: What trends have you noticed emerging based on the

businesses that Acumen Fund has invested in recently?
Dichter: In terms of a recent investment demonstrating some trends, I
would point to a company called Husk Power. They are operating in rural
India near the Nepalese border where there is a population of 85 million, but only 10 percent have access to
electricity. The Indian government has deemed that 20,000 of the villages in this rural area are out of reach
for receiving electricity by standard means. Husk Power was founded to reach those villages, and they are
using discarded rice husks to power generators that can service up to four villages each. We invested in them
a year and a half ago and they are currently serving 130 villages and over 150,000 people. They keep costs
down because they are using rice husks that are left to rot. They have found a business model that works
and created a product that is affordable.

The reason I think they are illustrative of a trend is because we have taken equity in the company, but they
have also been able to bring in a lot of local capital to get to where they are at now and keep building
generators. They receive a lot of subsidy from the Indian government, so half is grant funding and half is
investment funding. This illustrates the ways in which social enterprises are getting creative in combining
different sources of capital. I think what's going to happen is we are going to get more comfortable coming up
with different types of funding solutions for social enterprises, rather than just relying on one source.

You talked about creating different types of funding solutions for social enterprises. Do you think that
means it's going to be easier for social enterprises to get funding in the coming year?
I think it's hard to say. There's definitely more investing happening and there's more money going around. I
don't think we've seen enough yet to determine how it's going to play out for social enterprises. It's going to
be a matter of what kind of money is available and how do the investors connect with the potential social
enterprises. There's no doubt the sector is growing and there's more activity, particularly with impact
investing. But it's going to be up to the leaders in the sector to be transparent and there is still the question of
what criteria they are going to use to measure the impact of the investment. As long as there is a rigorous
focus on who the customer is, what their needs are, and how to serve those needs, it's great to have more
capital come into the sector. But, there's always risk involved with investing, and I worry about situations
where social enterprises might over promise and under deliver.

There seems to be a lot of excitement around impact investing. What is your assessment?
There's a huge gap between the amount of talking people are doing and the amount of impact investing that
is actually happening. The recent impact investing report put out by JP Morgan was a great synthesis of
where we are right now in terms of creating a new asset class, and that's fine as we're building a new market
around this capital. But 2011 will start to be the year of watching how this all plays out. The trend is that
there's a lot of growth and excitement, and more interest in impact investing, but the onus will be on us to be
really clear about what this asset class is all about. Is it about impact or investing? Hopefully it's about both.

Can you talk about the growing need to measure the impact that social enterprises are having?
Right now we're starting to see a trend towards creating universal metrics to measure that impact. We're
going to need to move from the conceptualization and building of the tools to really using them to analyze the
activity and show results in this sector. I think we're going to see more organizations adopting some type of
program or tool to help them report data. For example, Pulse is a tool that Acumen Fund developed for this
that is now being used by 50 of our peer organizations to help them measure the impact of their own
portfolios. If we are all using the same tool, we can start to aggregate the data and then we have a way to
compare what's happening in this sector. This is something that may take a long time to get into place
because we are in the early days of this evolution, but as we get more data and better data, we will be able to
start aggregating it for this sector.

What are some of the challenges your organization has faced in the past year, and how do you plan
to tackle those going forward?
I'll speak from the perspective of the sector as a whole because I've noticed that there's been more interest in
social change from the bigger public companies and the folks in the Washington. However, there's a
tendency to put this type of work into one box or the other. One of the big challenges has been what we
mean by our space, and going back to the discussion of creating metrics, what do we think success really
looks like for this sector? There's a big difference in success for those who are creating a large-scale
business that will affect as many poor people as possible, and the financial returns on those businesses at
places like Goldman Sachs. It's a question of what your yardstick is. But, as the sector grows, either we're
going to define how we measure success, or others will define it for us.

What's next for Acumen Fund and what are some of the goals you have for 2011?
We're coming up on our 10-year anniversary and we're looking broadly this year at what we can share with
the world that we've accomplished – not just in terms of capital investment, but how many lives have we
impacted, how many game-changing new businesses have we supported? We’re also expanding
geographically into West Africa and looking into expanding into education, and we also know that this is going
to be a year of synthesis for us to really capture what we’ve learned in these last 10 years.

Interview has been edited and condensed.

Interview: Jacqueline Novogratz on the art of investing in
businesses to change the world
By David Bornstein, October 11, 2010

Jacqueline Novogratz is the founder of the Acumen Fund, a nonprofit venture capital firm, which makes loans
and equity investments in companies that deliver health care, water, housing, and energy to underserved
markets in developing countries. The author of The Blue Sweater: Bridging the Gap between Rich and Poor
in an Interconnected World, Novogratz recently returned from Pakistan, where she reported on the human toll
of the floods, which have left twenty million people homeless, as well as some of the "uncommon heroes" she
met along the way. Here, she speaks with us about some of Acumen's ventures, where she sees her work
heading, and what she really means by social investing.

Dowser: Acumen looks to invest in companies that meet critical human needs and have the potential
to serve at least a million people. What do you see as one of your most promising investments?
Novogratz: WaterHealth International. They’ve developed a decentralized distribution model that brings
affordable water to villagers in India with a simple technology – ultraviolet treatment – and they sell it at an
affordable price. The $600,000 we initially invested in 2004 not only helped bring in $45 million in additional
investment to that company, but supported its success in reaching 300 villages. The government of Andhra
Pradesh has now contracted for them to build another 300 systems over the next year. There are five other
copy cat companies bringing water to a thousand villages. What I didn’t understand was that a single
company could actually seed and ultimately help build a new industry. That’s a game changer.

Can you give me another example of a business with huge potential to transform people‟s lives?
GEWP. Global Easy Water Products. What they have done is to bring drip irrigation to hundreds of thousands
of farmers. They’ve miniaturized the systems, and made them incrementally expandable. They’re selling a
product to low-income farmers that truly allows them to transform their lives. They use less water and energy
while their crop yields increase. Customers see their annual incomes increase by an average of $400 a year.
The company has served 30,000 smallholder farmers but they’re just getting started. We initially invested in
IDE India – which is a nonprofit -- during the prototyping stages. IDE sold more than 125,000 units. Then we
created the for-profit company GEWP together. We own 50 percent and they own 50 percent. This year
they’ll do $4 million in sales to dollar-a-day farmers. And they believe they’re on track to reach $25 million by
2015.
What‟s one of the most common characteristics you see among the entrepreneurs you work with?
They focus on people’s dignity. In Kenya, for example, fifty percent of the population has no access to public
sanitation, no toilets. David Kuria, the founder of Ecotact, has created a company that provides clean, safe
and beautiful pay-per-use public latrines and showers on public land. Most public latrines are poorly lit,
dangerous and dirty. In Ecotact’s facilities, people in uniforms are constantly mopping and cleaning inside
and out. They pipe in music. It’s all about making the experience pleasant and treating poor people with
respect. Ecotact pays for the upkeep beyond the 5 shilling fee with advertising and marketing. They have
shops on site that sell shoe shines and snacks and food, which is pretty interesting. The governments of
Uganda and Tanzania are now talking to David about adopting his model.

What do you think Acumen will be best known for five years from now?
I think we’ll be known as one of the key players in the field of alternative energy for the poor. Between our
investments in D.Light Design, Husk Power Systems, and SBA Hydro and Renewable Energy systems, we’re
probably already helping over a million and a half people have access to light. It’s new, but our energy
portfolio may ultimately be our most transformational. These companies are not only showing that there are
viable alternatives to kerosene, which is dangerous and unhealthy, but they offer people increased income,
better health, better schools, and high levels of decreased carbon emissions.

Why energy more than water?

To have a real game changer in water, you need government – not only to get water priced at a point people
can afford and would be willing to pay, but to do it at true scale with regulations. Energy can be a pure private
play. Poor people are accustomed to paying 20% or more of their income for energy. They typically buy it in
kerosene every single day. But they’ve never paid for water before and they don’t see any reason why they
should. So your market creation risk, time horizon and cost are much lower in energy than in water. When
people get typhoid or chronic diarrhea, they don’t necessarily correlate that to their lack of investment in
water. With light, you pay for it and you see a direct correlation to your productivity and your children’s
education. It is seen as a direct investment in your future. So even though Maslow’s hierarchy would say go
for clean water first, people will go for energy first.

You told me that you don‟t like the phrase „Doing well by doing good.‟ Yet, that‟s what comes to mind
for many when they think about social investing. What does it mean to you?
It implies that there are easy solutions. That the perfect way to change the world and end poverty is if we all
can make a lot of money doing it. But when you look at poverty and what it takes to break through entrenched
systems, high levels of fatalism, unbelievable levels of corruption, incredibly bad distribution, no
infrastructure, you are not going to make a lot of money and serve the poor in a way that they can afford. You
may make a lot of money and serve the poor in usurious ways that keep them poor forever, like many of the
mafia services do, but if you want to provide systems that are fair and affordable, and that they can trust into
the long term, building them takes a long time. Over time as you really hit scale, you will make money, but
we’ve been in some of our deals for six or seven years and we feel we’re just starting.

You describe Acumen‟s capital as “patient capital.” How patient is it?

Our patient capital is really patient. It could be four years, it could be ten years, and if it’s 12, we’re in, and if
it’s 15, we’re in. As long as we see significant change that’s moving in the right direction. People often
misunderstand what we’re about. I was with some guys from the financial sector and they kept saying, ‘What
are your returns?’ And I said, ‘I hope we get our capital back. We still have a philanthropic element to do this
work.’ And one guy said, ‘In other words, you have negative returns.’ And I said, ‘If we get 100% of the
principal back or even 80% back and millions of people have access to clean water, then I would dare you to
find a higher return on investment on the philanthropic dollar anywhere in the world.’

I said, ‘You are very comfortable with charity, seeing a 100% loss, send the money out and you never see it
again, and you justify the good it’s doing in the world even if your metrics are fuzzy. Or you’re comfortable
seeing 20% returns on your investments with no social impact, and potentially some harm. But you are so
uncomfortable in this middle section, where you might get the money back, might not, or you might lose 20%.’
And he said, ‘Yeah, because you’re playing the game of business but you’re not taking it seriously.’ And I
said, ‘I never said we were playing the game of business. We’re playing the game of creating change and we
are using business as a tool. We are incredibly serious about these businesses succeeding, but we never
forget that these businesses are about tackling poverty.'