a 2 aumen fund measuring social impact-molly alexander
TRANSCRIPT
Measuring Social Investments
Molly Alexander, Business ManagerOctober 2012
Patient CapitalBlending social and
financial returns
Financial return
expectation
No return
Traditional venture capitalMaximizing financial return
Maximize
Social Impact expectation
No realconcern
Maximize
0% IRR
To show that patient capital works…
Traditional philanthropyMaximize social returns
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We can show how we leverage capital
$33.0
$52
$69
$33 $12
$133
Initial Acumen
Fund investment (through
FY08)
Total capital raised
Additional 3rd party equity
invested
Co-investments
FY 2003-2009, $ Millions raised
Additional debt
financed
4x$169M
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Or the cash burn of our companies…
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5
But how do you measure value of a home…
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… the education from a good reading light…
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… or the human dignity of a decent toilet?
We still struggle to aggregate social impact
0.0
1.0
2.0
Ziqitza Healthcare: 1298 Ambulances
Financial Return vs. Social Impact
Water
Housing
Energy
Agriculture
Health
Aggregate Lives Impacted
Exp
ecte
d R
etu
rn o
n I
nve
stm
ent
Perf
orm
inIs
sues
/Wat
chM
idPe
rfor
min
gIs
sues
/Wat
ch
Little to none High impact
Mid
Mid
Overarching goals
Figure out what’s going on in the organization
– Are we on track for achieving financial targets?
– Are social impact goals being met consistently?
– Is the organization operating efficiently?
Adjust approach to better implement strategy
– Spot breakdowns early
– Use data to prioritize resources ($$$, people)
– Change course when necessary
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At Acumen, we start by counting outputs consistently
Inputs Outputs Outcomes Impact
•$$$
• Staff
•Technology
• Liters of drinking water purified
• # anti-malarial bednets sold
• # students graduating from school
• Reduced incidence of diarrheal disease
• Fewer cases of malaria in the community
• Improved literacy rate
• Increased incomes
• Proof that the outcomes wouldn’t have happened if not for the intervention (the “counterfactual”)
CHAIN OF CAUSALITY
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Acumen’s approach
Understandable
UsefulInexpensive
Acumen’s Metrics Philosophy
• Often M&E looks like an autopsy:o Too late to helpo Intrusiveo Often inconclusive
• Instead, metrics should be like taking a “pulse”:o Real-time, frequento Light toucho Useful, actionable
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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
Managing the process
2. Set targets
3. Collect data
4. Synthesize outputs
5. Review & take action
1. Select metrics
• What are the key drivers?
• How should they adjust over time?
• Who collects data?• How frequently?• Where’s it stored?• How’s it audited?• How is compliance
ensured?
• What outputs are created from the raw data?
• How frequently?• For whom?
• How frequently is each output reviewed?
• By whom?
• When are targets set?• How to insure they’re
realistic?
1. Select Metrics
1) Identify a few key areas that drive success for the organization– E.g., customer satisfaction; brand quality;
franchisee profitability; low fixed costs; employee effectiveness
2. 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 pages
4. Schedule regular reviews and get started
2. Set targets
3. Collect data
4. Synthesize outputs
5. Review & take action
1. Select metrics
•Revenues•Net
Income•Cash
balance•Months of
cash on hand
Financial•#
products sold
•# employees
Operational
•# customer visits
•# active or registered customers
Social
… and 10-12 add’l company-specific metrics
For example, Acumen tracks 3 categories of standard metrics for each company…
2. Set targets
3. Collect data
4. Synthesize outputs
5. Review & take action
1. Select metrics
Typical Acumen Metrics
Cash is king
+ 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. Set targets
3. Collect data
4. Synthesize outputs
5. Review & take action
1. Select metrics
2. Set targets
+Targets must be set in advance of 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. Set targets
3. Collect data
4. Synthesize outputs
5. Review & take action
1. Select metrics
3. Collect Data
+ Institutionalize processes for capturing / synthesizing / reviewing data– Develop written procedures– Train staff
+Hold individuals accountable+…but build checks & balances to
ensure data accuracy
Process matters more than technology
2. Set targets
3. Collect data
4. Synthesize outputs
5. Review & take action
1. Select metrics
Start with “pencil & paper” systems
+First, make the process work– Hammer out the kinks, build
consistency+Then, graduate to more
sophisticated technology solutions
2. Set targets
3. Collect data
4. Synthesize outputs
5. Review & take action
1. Select metrics
4. Synthesize Outputs
… and we prioritize support based on them
We produce concise monthly reports
2. Set targets
3. Collect data
4. Synthesize outputs
5. Review & take action
1. Select metrics
5. Review & Take Action
Transparency cannot be underestimated
2. Set targets
3. Collect data
4. Synthesize outputs
5. Review & take action
1. Select metrics
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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