Acumen's New Model for Third-World Aid

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Net Profits

Acumen uses classic consumer-focused design methods to solve the problems of poverty. Just as the Procter & Gambles (PG) and Motorolas (MOT) of the corporate world conduct extensive ethnographic research, working alongside their customers to create new products and services, Acumen's portfolio companies create from the bottom up. Instead of shoppers at a Los Angeles mall, however, they begin with people in villages like Tanzania's Usa River area. "Start with the individual," says Novogratz. "Build systems from their perspective. Really pay attention, and then see if they can scale."

Plenty of nonprofits have embraced the term "venture philanthropy" in recent years. But while most aspire to new forms of grantmaking, Acumen eschews giving money away. Instead, it buys equity in companies and offers them loans. It made a $600,000 investment in WaterHealth International, which will help the startup expand its franchise model for delivering safe, affordable water to Indian customers. It put up $1.25 million to encourage a guarantee of $3.75 million made by the Overseas Private Investment Corporation. The combined funding will ultimately release $50 million in mortgages from the National Bank of Pakistan, creating the country's first home ownership market for the poor.

Acumen's most successful company to date is A to Z bednet factory in Tanzania, which makes inexpensive mosquito nets that protect people from malaria. This fall, A to Z will make its final payment on a $325,000 loan. Donors are labeled "investors." They receive semiannual statements tracking the social and financial progress of portfolio companies. Acumen will bring in $661,000 in repayments and interest this year.

Opportunity Knocks

As the fund marks its fifth year, it's fast leaving startup mode. This year, it doubled its assets, and Novogratz has mapped out a vision to move it to $100 million under management. It launched the Acumen Fund Fellows Program, which trains a small cadre of talented and promising entrepreneurs in leadership, management, and design skills, and puts them to work in portfolio companies for nine months. It opened satellite offices in Karachi, Hyderabad, and plans for one in Nairobi. Google.org is giving Acumen $5 million, and the company's engineers are building a system to track its investments. The fund's offices will soon move to a floor in Google's New York headquarters.

Drishtee founder Satyan Mishra is the prototype Acumen recipient. At 32, he's soft-spoken with wire-rimmed glasses and a receding hairline. Mishra is as passionate when he describes Drishtee to his parents' neighbors in their small Indian village as he is when he sells an audience on his vision at the Clinton Global Initiative.

Most welfare agencies and philanthropies view the poor as burdensome, requiring expensive social services and government handouts. Mishra, by contrast, sees potential customers. He sees opportunities rather than obligations. After getting his MBA from the Delhi School of Economics, he was running a software-development outfit called Cyber Edge that gave Bhopal access to the Net when the government asked him to help bring these services to villages.

Village Competition

Thus Mishra began, in classic design form, with an unmet need: In 638,000 rural Indian villages where nearly half the inhabitants lived on less than $1 a day, there was little access to information about health, pensions, and government support. Could he devise a service that was seamless yet affordable? That was back in 2000. Over the next few months, Mishra and his team, who had changed the company name to Drishtee, tried several prototypes to come up with an information kiosk, a one-stop hub housing a computer, modem, digital camera, and a fax machine.

To roll out the kiosks, he launched a contest.