Metrics Matter
For Acumen Fund, metrics are a management tool that allow us to help the enterprises in our portfolio to improve their internal operations—and for Acumen Fund to know where to allocate support and how to improve its own efficiency. Metrics must be understandable, inexpensive and, most importantly, useful. We have defined a set of key metrics we use to assess our investments – for each investment, for our overall portfolio, and for the organization – that signal to our community where and how we can have the greatest impact.
At the level of our individual investments, we assess our investments along four criteria:
Financial Sustainability
Are the enterprises we fund in good financial health? Can they return our capital? We look at measures like, for example, the number of profitable health clinics that have been set up by a rural pharmacy franchise in Kenya and whether they can fully repay our loan
Social Impact
How many lives have been impacted by our investments, and what is the nature of that impact (e.g., the number of farmers using drip irrigation systems and the degree to which their productivity has increased)?. We opportunistically partner with world-class research organizations to conduct in-depth research to better understand the social impact of select investments. By leveraging academic quality research—into pricing or social impact, for example—we can design better business models and more effectively serve the poor.
Scale
What is the progress toward the goal of scaling the organization, and how is that scale helping address the problem (e.g., the number of people who live in rural India that have access to affordable, clean drinking water)?
Cost Effectiveness
Before we make an investment, we seek to understand whether there is another group in the charitable marketplace that can deliver the same product or service more cost-effectively. To do so, we have developed the Best Available Charitable Option (BACO) method. By comparing each of our investments with a real or hypothetical charitable option, Acumen Fund has begun to quantify, at least to an order of magnitude, how our social impact, for each net dollar invested, compares with that of other philanthropic options. Though it has limitations, this calculation reaches to the heart of the market-based approach, spelling out the cost saving, the financial leverage, and enterprise and technology efficiencies that drive financial sustainability and social impact. This allows us to understand the opportunity cost of our charitable capital, and make informed investment decisions that deliver the greatest social impact.
We expect quarterly metrics from each enterprise on the corresponding financial operational and social impact metrics. We then complete our evaluation framework with a Capability Assessment by our portfolio team that gives a broader qualitative snapshot of the health of the enterprise’s management team, its organizational systems, its continuing fit with Acumen Fund’s mission and its potential for financial sustainability and scale.
With Google’s support, we have built a web-based tool to share portfolio performance data across our four international offices. This Portfolio Data Management System allows us to keep metrics data and insights both reliable and available, cataloguing by geography, portfolio, and part of the business model (e.g., marketing, distribution, pricing, product design). We can then analyze this aggregate pool of data to identify cross-cutting principles—and to explore and communicate breakthrough insights into how to reach base-of-the-pyramid markets.
