A 2 aumen fund measuring social impact-molly alexander

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

3

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

3

Or the cash burn of our companies…

4

5

But how do you measure value of a home…

6

… the education from a good reading light…

7

… 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

1 2

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

11

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