A 2 aumen fund measuring social impact-molly alexander
Measuring Social InvestmentsMolly Alexander, Business ManagerOctober 2012
To show that patient capital works… Traditional venture capital Maximizing financial return Patient Capital Blending social and Maximize financial returns Financial return 0% IRRexpectation Traditional philanthropy Maximize social returns No return No real Maximize concern Social Impact expectation
We can show how we leverage capitalFY 2003-2009, $ Millions raised $169M 4x $69 $133 $52 $33 $12 $33.0 Initial Co-investments Additional Additional Total capital Acumen 3rd party debt raised Fund equity financed investment invested (through FY08) 3
We still struggle to aggregate social impact Financial Return vs. Social Impact 2.0 Performing Performin Ziqitza Healthcare: 1298 Ambulances Lifespring Broadreach GEWP A to Z Textile Mills WHI Expected Return on Investment Insta Products Books of Hope Water Saiban VisionSpring Ecotact SHF Mid 1.0 Housing Energy Agriculture d.light design Health Micro Drip FMiA Kashf Foundation Issues/Watch Drishtee AyurVAID BEEPZ 0.0 Little to none Mid High impact Aggregate Lives Impacted
Overarching goals 1 2 Figure out what’s going Adjust approach to better on in the organization implement strategy – Are we on track for – Spot breakdowns early achieving financial targets? – Use data to prioritize – Are social impact goals resources ($$$, people) being met consistently? – Change course when – Is the organization operating necessary efficiently?
At Acumen, we start by counting outputsconsistently CHAIN OF CAUSALITY Inputs Outputs Outcomes Impact• $$$ • Liters of drinking • Reduced • Proof that the water purified incidence of outcomes wouldn’t• Staff diarrheal disease have happened if • # anti-malarial not for the• Technology bednets sold • Fewer cases of intervention (the malaria in the “counterfactual”) • # students community graduating from school • Improved literacy rate • Increased incomes
Acumen’s Metrics Philosophy• Often M&E looks like an autopsy: o Too late to help o Intrusive o Often inconclusive• Instead, metrics should be like taking a “pulse”: o Real-time, frequent o Light touch o Useful, actionable
Our metrics mantra+ Don’t ask for information that is not fundamentally important for our companies to run their businesses and deliver on their social objectives+ Don’t ask our portfolio companies to generate new reports they aren’t capable of generating from their current systems…+ …But, if their current systems can’t collect essential data to run their business & track their social impact, we will help them find a way to do so Metrics must be: Understandable, Inexpensive, and Useful 13
Managing the process • When are targets set? • How to insure they’re 2. Set realistic? targets • Who collects data?• What are the key • How frequently? drivers? 1. Select 3. Collect • Where’s it stored? metrics data• How should they • How’s it audited? adjust over time? • How is compliance ensured? • What outputs are created• How frequently is each 5. Review 4. & take Synthesize from the raw data? output reviewed? action outputs • How frequently?• By whom? • For whom?
2. Set1. Select Metrics targets 1. Select 3. Collect metrics data1) Identify a few key areas that drive success 5. Review & take action 4. Synthesize outputs for the organization – E.g., customer satisfaction; brand quality; franchisee profitability; low fixed costs; employee effectiveness2. Devise a handful of key metrics that are: - Quantifiable & meaningful - Not too burdensome to collect (the fewer the better)3. Create reporting templates for synthesizing the raw data – Incorporate qualitative information as well – 1-2 pages4. Schedule regular reviews and get started
2. SetTypical Acumen Metrics targets 1. Select 3. Collect metrics data For example, Acumen tracks 3 categories of standard metrics for each company… 4. 5. Review & Synthesize take action outputs • Revenues • Net Income Financial • Cash balance • Months of cash on hand • # products sold Operational • # employees • # customer visits Social • # active or registered customers … and 10-12 add’l company-specific metrics
2. SetCash is king targets 1. Select 3. Collect metrics data 4. 5. Review & Synthesize take action outputs+ If you only track one financial metric, let this be it: “Months of cash on hand” If you run out of cash, there is no mission.
2. Set2. Set targets targets 1. Select 3. Collect metrics data+ Targets must be set in advance of 4. 5. Review & Synthesize take action outputs reporting period January 2013 is too late to budget for 2013+ Ensure targets are realistic and achievable+ Review all data against these targets, and hold managers accountable for unrealistic projections
2. Set3. Collect Data targets 1. Select 3. Collect metrics dataProcess matters more than technology 4. 5. Review & Synthesize take action outputs+ Institutionalize processes for capturing / synthesizing / reviewing data – Develop written procedures – Train staff+ Hold individuals accountable+ …but build checks & balances to ensure data accuracy
Start with “pencil & paper” systems 2. Set targets 1. Select 3. Collect metrics data 4. 5. Review & Synthesize take action outputs + First, make the process work – Hammer out the kinks, build consistency + Then, graduate to more sophisticated technology solutions
2. Set4. Synthesize Outputs targets 1. Select 3. Collect metrics dataWe produce concise monthly reports 5. Review & take action 4. Synthesize outputs… and we prioritize support based on them
2. Set5. Review & Take Action targets 1. Select 3. Collect metrics data 4. 5. Review & Synthesize take action outputs Transparency cannot be underestimated
Some points of caution…+ We manage what we measure, so be careful what metrics you choose…+ And just as we balance the social & financial returns…+ We need to know that not everything of value can be measured, so don’t ignore immeasurable value and values 23