Social Entrepreneurship and Impact Investment

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Assessing Weaknesses: The first challenge is to identify the major capabilities like financial sustainability, potential for scale, etc. It can be a bit time consuming to think about the top capabilities that can provide the keys to the future for the firm and also, capabilities that link to the firm strategy. Also, one of the weaknesses of this matrix is that once you have analysed the whole project, the final decision is still very subjective and does not give a firm answer, whether to accept or reject a project or what else is required to meet the needs of the project. Moreover, in the assessment matrix, all the categories are equally weighed and does not specify which category is more important than the other.

- What is your evaluation of the BACO as a measurement method?

The BACO (Best Available Charitable Option) method is definitely a useful tool for the Acumen fund to have a better and more clear idea on their investment options and analyse how well they meet their investing criteria. The fact that BACO is a relative benchmark and not an absolute standard - such as social return on investment, allows them to have a more realistic perspective on the cost-effectiveness of their investment compared to other options (non-profit) in the same space. Moreover, calculating the BACO ratio for three different financial and social impact scenarios, leads to a more “down-to-earth” approach and forces them to consider and be prepared for different situations driven by the occurrence of the identified risks.

Even though it is a useful tool, it has several drawbacks/limitations stated below:

- The method is strongly based on assumptions (particularly on the social impact projections)

- It is necessary for a charitable option to exist in the same space for it to be compared with Acumen Fund potential investment

- There is a risk of not choosing the right charitable alternative because of significant differences in the business model of the comparable effort

- Does not account for long-term impact (beyond 5-7 years of investment period)

- Does not account for other positive effects driven by the main social impact.

Taking the above into consideration, it is possible to state that BACO is a useful tool for getting to rough estimates since it provides a framework to explore the best way of delivering critical goods and services to the poor, but not a support to make the financial investment. In other words, this methodology should be complemented with comprehensive quantitative and qualitative data before making the final decision of investing in a project.

- What is Acumen Fund trying to achieve? What is its value-add?

Considering that Asset owners and investor were hesitant to put their money into impact investment because of the lack of benchmarking or simple rating systems, Acumen fund is trying to build a well-structured performance measurement system to feed the benchmarking against peer organizations and track the investments of the fund.

By creating the “Pulse” scheme, Acumen fund reflect its proactive approach in developing a more comprehensive, standardized and useful system with three clear metrics (financial, operational and social) that will help them use all the required data to stay focus on building the desired business and identify potential problems on time.

The Acumen Fund focuses on delivering services to the poor in water, health, care, housing, energy and agriculture. Their investments are not simply in form on financial capital but also build a portfolio company´s human and knowledge capital through assistance in business planning, strategy and performance management. The fund wants to guarantee sustainability maintaining the above mentioned social goal by adding value through accountability. With this strategy, Acumen will have higher probabilities of attracting more investors to put their money in the fund leading it to grow and increase social impact, financial sustainability and scalability of different social projects. Moreover, Acumen will gain competitive advantage compared to other organizations in the field.