Our World

Early-stage impact investing

When Mark Zuckerberg needed early-stage financing for Facebook, he found Peter Thiel. But there was no one there when Rajesh Shah needed seed funding for SABRAS, a for-profit social enterprise that could improve the efficiency and life quality of Indian salt farmers. Why?

Because of a gap in funding in the social enterprise space. Acumen Fund was established to enable social enterprises to scale, by filling the funding gap between philanthropic donations and later-stage financing with “patient capital.” Today, with the growing number of impact investors operating, the gap is shrinking.

But there is still friction between the social entrepreneurs seeking funding and the impact investors looking for organizations to fund: many impact investors invest only in social enterprises that have gained some on-the-ground traction – be they multi-site pilots, early success in acquiring and satisfying customers, and some revenue generation. But how does a social enterprise get to a point at which it’s investment-ready for impact investors – even early-stage investors? How does it fund this evolution?

Immature social enterprises need money too, after they have tapped out the well-known “3 F’s” of raising start-up capital – Family, Friends, and Fools. And while in Silicon Valley there is a network of angel investors and other sources of seed funding to finance immature technology companies, the impact investing world has no equivalent. World Bank Institute Practice Manager for Innovation Aleem Walji, when interviewed by the SSIR, emphasized this issue: “We see a major gap between the needs of most social enterprises (requiring early stage angel finance) and where most impact investors sit along the conveyor belt of capital (wishing to deploy private equity/debt).”

Social business accelerator programs and social entrepreneur fellowship programs have been very successful at helping seed-stage socents push their organizations along so that they can demonstrate early success and be considered for funding by impact investors. Examples of successes are:

But there is still the seed-stage funding issue to deal with. Now aiming to fill this new earlier-stage gap are organizations like Village Capital, a spin-out from early-stage impact investor First Light Ventures, and Toniic, a globally-focused impact-investor-oriented angel network – both of which were launched last year (Investor’s Circle, launched in 1992, is an impact investing angel network focused on US and international businesses). Village Capital awards seed financing to early-stage social businesses by running incubator programs. In order to make this cost-effective, the funding is awarded by the incubator participants themselves with peer-voting, not by Village Capital or its investors. This funding democratization positively enhances peer-to-peer interaction and review, as participants pitch and judge each other. And it frees Village Capital investors to mentor the social entrepreneurs without having to grade them at the same time. Village Capital cheaply distributes early-stage funds to worthy social businesses while providing critical learning and networking opportunities. SABRAS - the social enterprise mentioned at the beginning of this post – went through Village Capital’s 12-week business accelerator program (a partnership with Dasra/Social impact) in India in 2011 and was voted by peers in the program to recieve funding at the end of the program.

Realizing that there is no silver bullet when thinking about how to enable and fund social enterprises, it was exciting for me to dig into the early-stage investing space as part of my internship, to understand the ways these types of organizations (seed-stage funders, business accelerators, early-stage impact investors) complement one another and are working towards offering a full continuum of financing options for social entrepreneurs – from the time they conceive an idea to the time they need financing to scale their businesses.

Together, these investors and advisors are offering innovative business models, critical business development, and funding support that are certainly making it easier for high-potential social entrepreneurs to find what they need to succeed.

Clare Hunt is a student at Stanford University’s Graduate School of Business and an Acumen Fund Summer Portfolio Associate.


Reflections on the India Fellows Seminar

Each year, the India Fellows Program brings together up to 20 emerging leaders from different regions, sectors, and socio-economic backgrounds in India. During the fellowship year, Fellows remain in their jobs and meet every 6-8 weeks throughout the year for 4 seminars and 2 collaborative projects, each about a week long. As the India Fellows Associate, Jacqui is responsible for supporting all aspects of the program recruitment, logistics, marketing and strategic planning. Below, Jacqui reflects on the first seminar, Foundations of Leadership. You can read more about the fellowship program here[Read More]

Adaptive Leadership in Action: Addressing Cultural Norms & Giving Women a Voice

In the fall of 2013, +Acumen launched the course Adaptive Leadership: Mobilizing for Change in partnership with the Cambridge Leadership Associates. This course is for anyone who wants to become more effective at leading their organization through change. Below, one of the course participants shared her story about how this course impacted her work and ability to affect change. [Read More]

Making Sense of Social Impact in Action: The Value of Educating Our Youth

At Acumen, one of the most common questions we get is how we measure social impact. Our newest +Acumen course – Making Sense of Social Impact: Acumen’s Building Blocks for Impact Analysis. – will provide an entry point for how to think about impact and we’ll share frameworks that help us define what to measure and why. Makoto Matsuura, founder of cobon a not-for-profit focused on youth education in Jakarta, Indonesia and Osaka, Japan, took a pilot version of this course and shared his reflections with us. [Read More]

Good news for philanthropists in the U.K. and Europe

We are excited to announce that Acumen now holds a CAF Charitable Trust in the United Kingdom. CAF, the Charities Aid Foundation, is a registered U.K. charity. By donating to Acumen through CAF, you can use Gift Aid if the amount of Income Tax and/or Capital Gains Tax you’ve paid for the tax year in which you make your donation is at least equal to the amount of basic rate tax  [the charity or Community Amateur Sports Clubs (CASCs) and any other charities or CASCs] you donate to will reclaim on your gift. CAF will reclaim 25% Gift Aid from HM Revenue & Customs and pass this through to Acumen.  The donor can claim higher rate tax relief (for more information, please refer to CAF’s online resource, What Is Gift Aid?). [Read More]

d.light Leaders Named 2014 Social Entrepreneurs of the Year

We are thrilled for our portfolio company d.light and Donn Tice, Chairman and CEO, along with cofounders Ned Tozun, President, and Sam Goldman, Chief Customer Officer, for being named Social Entrepreneurs of the year 2014 by the Schwab Foundation for Social Entrepreneurship. d.light is a for-profit social enterprise that manufactures and distributes solar lighting and power products with primary markets in the developing world, today announced that d.light, along with 37 other individuals and organizations in the 2014 class, will be fully integrated into the events and initiatives of the World Economic Forum. [Read More]