Ajit Mahadevan, Country Head, Acumen, tells Sarika Malhotra that the company's aim in investing patient capital is not to seek high returns, "but to jump-start the creation of enterprises that improve the ability of the poor to live with dignity. In the long-run we do aim to see a return of our capital". Acumen has been investing in India since 2001 and has backed 26 companies across portfolios, including low-cost maternity care, skills training and education, water filtration enterprises and more. In addition to providing patient capital to investee companies, it has also invested in human capital and a wide range of management support services to help the companies scale up.
Q- How do you see the social enterprise space unfolding in India?
A- India has a long tradition of entrepreneurship, including the social impact space. For Acumen, this has meant a rich pipeline of potential investment opportunities and a strong position for India as the 'laboratory for innovation' in the sector. The local social enterprise ecosystem is also slowly strengthening, with corporates looking to offer technical expertise and impact investors setting up a self-regulatory body (Indian Impact Investors Council - IIIC).
It is also exciting to see more and more young people, who don't see any conflict between doing good and making money, becoming increasingly interested in the space. We can see this from the growing number of applications for our global fellows programmes and plus-Acumen online courses. Last year, we launched our India fellows programmes which is structured like an executive MBA and aims to inspire, enable and connect future change leaders, and equip them with hard skills and moral imagination to tackle poverty.
Q- What have been your biggest lessons as an investor in this space?
A- One of Acumen's major learnings has been that business alone is not enough to solve the problems of poverty. We have continuously seen the importance of leadership when it comes to creating and implementing lasting solutions, and the need for talent in places where there are no structures, little trust and lots of corruption.
As a result, we have been doubling our leadership investments over the past eight years through our global and regional fellows programmes. We have also learnt that we won't succeed alone. So, we are taking the very best ideas, distilled from more than a decade of investing in companies and leaders, and synthesising and sharing them globally, so that others can accelerate their impact.
Our new report, written in conjunction with Bain and with support from the Gates Foundation, shares models for pioneer firms (that they can use) to scale up agricultural innovations (so that it reaches) millions of smallholder farmers.
Q- What challenges do Indian entrepreneurs face in the social enterprise space?
A- Indian regulations do not allow social enterprises to receive philanthropic grants (unlike other geographies where Acumen operates, such as the US, East and West Africa, and Pakistan, where it is permitted). We need to unlock access to different kinds of capital from grants to low-interest loans to make more social enterprises sustainable and scalable in the long run.
Access to talent is also a major issue. For example, Asian Health Alliance has struggled to find a radiologist to work in Tier III and Tier IV towns of Karnataka. We hear over and over how lonely the journey of a social entrepreneur can be. Our India fellows programme emphasises the importance of connection to a community that gives social change makers the courage to continue on their path, while also strengthening the leadership abilities of the fellows.
We also connect our fellows and investees with Acumen's global network of corporate and individual partners and advisors who are stalwarts in their respective fields, to create a platform for mentorship and collaboration.
Q- What role does Acumen play in investee companies?
A- Acumen invests in early-stage social enterprises that provide critical (and) affordable goods and services to the low-income population. For companies that are operating in emerging markets, and focused on serving low-income customers, it is critical to have access to patient capital that takes into account higher levels of risk, longer time horizons, and the realities of a customer base whose trust is hard to earn.
As an investor, we help companies develop financial and organisational discipline when they are at a critical stage in their development. Our local team provides rigorous support to our investees and are often further committed as board members.
We strategically assist our investees in dealing with issues critical to their success, such as defining growth strategy, developing processes and systems to support growth, designing organisations structure and assisting on key hiring decisions and fundraising.
Acumen's technical assistance initiative also enables corporations that are willing to go outside their comfort zone to partner with our investees in creative ways and build more inclusive and sustainable business models.
Beyond ticking the CSR box, these collaborations allow corporates to get closer to the BOP (bottom of the pyramid) marketplace and see how the value chains work in emerging economies, while also creating sustainable and scalable social impact.
Our global fellows programme brings the brightest young minds to come work with select investees over the course of a year as part of their training to become social change leaders for the future.