When Jacqueline Novogratz founded Acumen Fund in 2001, philanthropy was still mostly about big, fusty foundations. Her nonprofit venture fund pioneered the idea of philanthropic business, tackling poverty through actual services and products. These days, "impact investing" is all the rage; 15 years ago, there was a line between doing good and making money.
Acumen (it's since streamlined and dropped the Fund bit) has invested $100 million in 100 enterprises from Pakistan to Nigeria. And now it's turning its attention to another country blighted by poverty: the United States. Acumen America looks to harness our famed entrepreneurialism, but to take on social problems, not just to make another app or labor-saving device.
"America's sense of entrepreneurship is as alive today as it's ever been," she says. "The issue is that most entrepreneurial efforts are focused on meeting market needs and the demands of an affluent group. We need to focus on the biggest problems we have, whether it's health care, the financial system, or intractable poverty."
Launching this month, the new fund is focused on three areas: financial inclusion, workforce development, and health. It's already made a couple of investments. One is Baltimore-based WorkAmerica, which works with community colleges to help students find trade jobs. The other is Healthify, which helps health providers refer low-income patients to social services.
Novogratz sees a big opportunity in promoting wellness as a way of reducing the cost of treating people when they get sick. Under Obamacare, insurers are now incentivized to keep patients out of hospitals as they get reimbursed annually per patient, not per health transaction.
"We're seeing a new crop of entrepreneurs looking to build positive revenue models that reduce the cost to government and the insurance companies by essentially keeping people safer and healthier and out of the hospital," she says.
There's also an opportunity to cater to America's unbanked population and all the people who struggle to keep good credit scores. "Up to 70 million people in this country are unbanked, and many of them have to pay rates in excess of 300% for payday lending. That's very similar to the rates our feudal farmers in Pakistan pay," Novogratz says.
Startups like Cignifi and First Access have pioneered alternative credit scoring using mobile phone data. And Novogratz wants to see if the model can be reimported to the U.S., having seen success in East Africa and South Asia.
One of the biggest challenges of entering underserved markets is a lack of data to work with. By making philanthropic investments, Acumen hopes to generate market information that can be exploited by more conventional capital at a later stage. It recently conducted a "lean data sprint" in South Asia and Africa, where 23 of its companies gathered data via a simple cell phone survey. In time, Novogratz sees such impact data being incorporated alongside standard financial accounting. Measuring impact remains one of the biggest issues impact investing has to tackle.
Dozens of impact funds have emerged since 2001, including a number from major financial institutions. (Barclays is an anchor investor in Acumen America, along with the Robert Wood Johnson Foundation and the Hitachi Foundation.) Some have criticized the shift to higher-yielding funds, saying there's a contradiction between naked profit-making and social good. But Novogratz says there's room for all kinds of players, and the impact industry will become both more segmented and defined over time.
Meanwhile, the line between making money and doing good will continue to blur, such that philanthropy and business will no longer be separate entities, but part of the same thing. "We're seeing a convergence of corporations integrating sustainability and nonprofits interacting with for-profits. Our lexicon has not yet caught up to the different models we need in our more global, networked economy," Novogratz says.