Dowser 2011 Year in Review interview

[This interview first appeared on]

This is the 1st part of our Year in Review Series, in which we reconnect with our group of experts about the trends they forecasted for social entrepreneurship in 2011 and look forward to the year ahead. As the Chief Innovation Officer at Acumen Fund, Sasha Dichter is constantly keeping abreast of significant developments in the social enterprise sector. Acumen Fund, which recently marked its 10th anniversary, has a decade of experience investing in solutions to poverty, and as a result, Dichter has first-hand knowledge of the strength of the investing market. Here he discusses the progress made this year in building a funding pipeline, and what it will take to get more capital flowing to the sector. #

Dowser: In our interview earlier this year, you said there’s been a gap between the people talking about impact investing  and the amount of investing actually happening.  What is your assessment now?

Dichter: What’s clear is that more funds are being raised. However, the general theory about what’s going on is that there’s still a lag cycle from talking about it and actually doing it. Anecdotally, we know that more funds have been raised, both in this country and globally, and as expected, people are starting to follow through on this excitement. I would be confident in saying that there have been changes in the investing environment in several countries. There’s a lot of enthusiasm for sure, but it’s still hard to get a benchmark on the volume of investing that’s happening on the ground. #

In general, would you say that investing in social enterprises has become more commonplace in the past year?
I think the level of interest is high, but how that’s translating into what people are doing still remains to be seen. The mainstream investors are increasingly aware that the sector exists and are expressing interest and curiosity about it. Ideally what they want is a story that involves little to no tradeoff on the financial returns. The story that people are hoping to be told is that you can invest in this space and do quite well financially, but there is a gap between that hope and the underlying reality of doing this investing. The opportunity and challenge for the sector is to understand and communicate what the real economics of solving social problems are; there is a way to deploy investment funds to solve social problems, but there is no reason to assume that the rewards and risks would be good because these are really tough problems that we’re solving.

So, how can the sector seize that opportunity?
I hope we can develop a more nuanced vocabulary around the problems we are trying to fund, for example, communicating to investors what would it really look like to get water to this village in Africa? And, asking them, ‘How would you feel if you could make that happen, and then, What if you got your money back?’ More and more we can tell the story of the success of solving very big problems and sharing the complexities of actually doing this. We are able to say, ‘Here is what we’ve accomplished in the world in terms of changing people’s lives, and by the way, we got you your money back.’ Approaching it from an impact perspective rather than focusing on what types of returns you are getting, will increase action among traditional investors.

How do you think the funding pipeline for social enterprises has evolved over this year?
I think the world is still digesting the JP Morgan report [about impact investing as a new asset class], and that has been quite influential for what the sector can look like. At Acumen Fund, we are doing some research with the Montitor Group to try to better understand our portfolio and the different stages of organizational development in funding. The goal is to really understand the types and stages of capital that are needed to create social enterprises, all the way from grant makers, and the public sector players providing smart subsidies, to patient capital and the more mainstream investors. Some of that research has already shown us that there are four stages of funding development for social enterprises. Typically they start with some seed capital and there is a good amount in grant money, and then there is growth capital, and finally the business is at the stage where they can take on a big investment. However, there’s a gap when it comes to Stage 2 and Stage 3 funding for social enterprises.

One of the questions we need to be asking ourselves is how do we as a sector build a pipeline of Stage 4-ready companies and think about the availability of funding along those stages. There aren’t as many players in the market that have the flexibility and risk appetite to really step in there. When you look at the microfinance sector, $20 billion of philanthropy went into it before it entered the phase where the majority of capital going into the market was investment capital.  So, for social enterprises, where is that philanthropic capital going to come to play? It could be deployed as low return investment capital for example, or there’s a lot of ways to handle it. But what seems to be the case when we talk about the maturity of investment capital out there, that it’s not the stage that investors want to play because it doesn’t align with returns they are looking to get. I think we are still trying to figure out who is going to fill that gap and how.

Acumen Fund just celebrated its 10-year anniversary, and in our last interview you mentioned this was going to be the year to assess how much impact the organization has had. What have you learned about your progress?
It’s been a humbling process to reflect on the past 10 years for Acumen Fund. We have $73 million in cumulative investments, and we are seeing capital get returned to us. Ten years ago, this was just an idea to invest in solutions to poverty and now we have this robust sector where we’re talking about the specifics of those investments. We are in a drastically different place in the world now. We still have a long way to go and a lot to do, but we know that patient capital is working and it’s changing people’s lives. The practice of philanthropy looks radically different than it did 10 years ago, not just in the investing sector, but also more widely. The idea that we can use capital in this productive way and we can control it without having it control us to create the outcomes we want is really exciting. The sector offers a certain sense of hope that we can make massive progress in a short time and solve massive problems in very creative ways. It still feels like we are just getting started.

2 thoughts on “Dowser 2011 Year in Review interview

  1. People are still talking more than doing, etc., but I wish some of your language would be a bit different. Shouldn’t we like to see impact investing as opportunities rather than “problems”? And tend to err towards the side that people can make money while doing good and that a “good” business in Africa or India or… has a social impact through creating jobs and paying tax revenue to the government…

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