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Acumen Fund’s Transparent Experiment

Cotton farmers selling their crops to Gulu Agricultural Development Co., which is expanding its operations in northern Uganda with an investment from Acumen Fund. Photo: Todd Shapera

Can impact investing survive the disclosure of impact investment performance?

Few impact funds publicly report the operating results of their portfolio companies — even on an aggregated, anonymized basis. To be sure, accurate valuations of social enterprises can be hard to pin down. But there’s also fear that showcasing the real numbers might snuff the enthusiasm of other investors to even give impact a try.

Acumen Fund, one of the earliest social venture funds, shows that it’s possible to open up a little more and survive. Tucked into a report it issued last spring were details that showed Acumen’s portfolio companies have an average after-tax loss of 20 percent. Its eight most profitable investments returned profits of just 6 percent.

“The dirty secret is, I’m not seeing a lot of people making money in this field,” Jacqueline Novogratz, Acumen’s founder and CEO, said when the report was released.

The news that Acumen expects only a 1x return — simply, the return of its capital — was not a surprise to its backers, who are generally philanthropic funders. The report notes, however, that such returns are “far off the expectations of mainstream financial-first investors.”

Novogratz said Acumen has gotten a positive response to the report. “The fact is, these companies face tremendous challenges,” she said in an e-mail exchange.

Acumen used its own experience to illuminate the need for “enterprise philanthropy” to help social ventures weather the early years of developing products, refining often-novel business models and stoking customer demand. Showing the need for below-market risk capital at the seed stage, Novogratz said, “paints a more accurate picture of what is happening on the ground.”

As a nonprofit with philanthropic support, Acumen’s situation differs from for-profit venture funds that raise money from more conventional institutional investors. And as a public charity with multiple donors, Acumen has more reasons to disclose its portfolio performance than an impact fund financed by a single investor. For example, there’s little public information about the portfolio performance of the Omidyar Network, the hybrid for-profit investment fund and non-profit foundation solely backed by Pierre Omidyar, the founder of eBay, and his wife, Pam.

All the same, Acumen doesn’t plan to make a regular events out of the public the disclosure of the twice-yearly accounting of portfolio performance, though it shares the results at its own investor gatherings. Says spokeswoman Yasmina Zaidman, “Our portfolio performance remains in the range of our target of 1x, and is secondary to the social impact of the companies.”

About the author: David Bank


  1. Tony Berkley says:

    Great piece, David and a nice example of careful analysis of public data. I would encourage all impact investors with active portfolios to open up about their financial and social impact and be clear about their goals and expectations for each one. I salute Impact IQ for raising a key issue and providing a public forum for discussion.

    Please keep in mind that Acumen Fund has always accurately represented their goals as return of capital and has been clear that many of their investees require subsidy in the form of grants to tackle the toughest challenges.

    It would not have been fair to frame their portfolio returns in terms of the typical financial expectations for the asset class of venture capital. It is important to think through how information can be misused by the many “haters” who will be tempted to misuse information like this for other agendas….

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