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Interview: Acumen Fund’s Sasha Dichter on trends to look for in 2011

This post originally appeared on Dowser.org on 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.

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