Investing in Social Change

There is little more gratifying than reading about the formation of the Acumen Fund in the autobiography of Jacqueline Novogratz, The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World. 

When Novogratz launched the Acumen Fund in 2001, her vision was as follows:

“We would raise charitable funds, then invest equity, loans, and grants – whatever was needed – in organizations led by visionary entrepreneurs who were delivering low-income communities services such as safe water, health care, housing, and alternative energy sources.  In addition, we would provide them with wide-ranging support on everything from basic business planning, to hiring managers, to helping them connect to markets.  We would measure the results of our investment not only in the capital flowing back to the fund, but also – and more importantly – in the investment’s social impact.  Any money returned would then be reinvested into other enterprises that served the poor.” (p.192)

Bravo! 

The question is this: how to measure social impact?  Certainly she’s abandoned the “standard” measurement of “percentage of each dollar spent on programs.”  I applaud this.  I’d like to know if the Acumen Fund has answered this question broadly – universally - or if it reviews each investment individually, “starting from scratch” when it comes to metrics?

In her November 2010 Quarterly Update Letter (www.acumenfund.org), Novogratz writes “our most critical metrics are around the number of people we serve on an ongoing basis, the sustainability of the companies we help build and the transformative industries we help create – asking questions such as are they growing?  Enduring?  Bringing quality services with integrity?”

Will Acumen share its years of experience on measuring results with the nonprofit world?  Can it shed any light on some universal metrics?

I leave you with this thought from her book:

I … took issue with the practice of donors typically funding only programs instead of institutions.  ‘I want to be certain that all of the money goes directly to the people who need it most,’ prospective donors would tell me.  That is a fine strategy for providing alms or direct charity.  At the same time, no one would invest in a company and not expect it to pay for hiring great people, paying the rent, and keeping the lights on.  We needed philanthropists to build powerful institutions in the social sector, too. 

We committed ourselves to changing the traditional donor-grantee relationship.  Our donors would be called investors.  They were still giving us charitable gifts, of course, but we wanted them to think of themselves as investing in change, of taking seriously how their money was spent.” ( p.193-4)

Why is this philosophy appropriate only for Acumen’s ideal social sector organization, expected to be both responsible and successful?  Shouldn’t all donors feel this towards the organizations to which they give? 

The plight of nonprofits is a result of the short-sighted "donor" thinking that exists today.  Lack of investment in infrastructure, in long-term planning, and in the people of any institution will spell its doom.  Charity or not.