Acumen Fund Case Study

Roles for Acumen Fund in development

Acumen Fund and other intermediary organizations can play different roles in facilitating the development of successful ventures in developing countries. Acumen Fund and other similar organizations invest in health, seeking to change the market dynamics and raise the availability of affordable healthcare services and products. The portfolio focuses along three dimensions, including low-cost structures, new pricing models, and novel delivery systems. Acumen invests in housing to enhance the accessibility of affordable housing by raising the supply and offering credit via mortgage financing (Michigan Ross School of Business, 2008, p. 6). The housing portfolio focuses on three measurements, including building innovative financing solutions, offering homeownership and job opportunities, and making way for holistic “shelter-infrastructure” solutions.

Acumen aims to increase access to water for agricultural and households’ needs and to enhance water quality and access to sanitation (Michigan Ross School of Business, 2008, p. 6). The water portfolio is centered along with three measures, including market driven solutions, scalable goods and services, and technology transfer. The organization also targets renewable energy ventures that sell necessary energy services to the poor, including the use of solar, biogas, and biofuels, and sources of energy (Michigan Ross School of Business, 2008, p. 6). Energy projects can raise productivity and increase the poor’s income by lowering the time and money used in the present energy sources.

These efforts are required because they impact almost 10 million people at the base of the pyramid (BoP), or people earning below $4 a day (Michigan Ross School of Business, 2008, p. 1). Acumen drives changes in the development division’s model of poverty mitigation and develops talent series to build a feasible sector of business people. Acumen makes debt or equity investment in the range of $300,000 to $2,000,000 in institutions and enterprises serving many poor people with no access to dependable health services, clean water, or formal housing ((Michigan Ross School of Business, 2008, p. 1).

Pros and cons of the different Acumen Fund’s pillars

Pros of capital include acting as an engine for pushing forward the development model. Cons are such as capital can be misused. Acumen has attracted great interest from young professionals, which is a great opportunity of filling in the gap of lack of talent. Acumen fund began the Acumen Fund Fellows Program to meet the investee enterprises and build leadership for the field and then in the development community. Talents enhance Acumen brand and community engagement. Talents have cons in that in the first few years of the organizational operations local talent was among the greatest obstruction to growth for businesses helping the poor.

Knowledge is shared through discussions on using market-based strategies for resolving poverty issues. Through wide efforts of communication that entail communication from businesses and poor customers, Acumen Fund has changed the commonly held views about world poverty and increased visibility of market-based approaches. Knowledge has cons that include leaving less room for questions; too much sharing of knowledge can exhaust prospects, making all the information shared rather useless. Knowledge can also give prospective entrepreneurs a lot to think about. There exist tensions between these initiatives.Capital investments are perceived as the forces pushing forward development model; however, sharing of knowledge from such investment exposures and developing a base of talents domestic leaders and entrepreneurs had the prospective to catalyze it more.

Options for how to use a potential $10M contribution

The management team has come up with four alternatives of how to use a prospective $10M donation.The management could use new funds to explore and invest outside of Acumen Fund’s existing geographic reach. This would help the management compensate for the volatility of the existing region, in the long lowering risk relative to less-diversified collections (Hill 2020, p 131). However, it is important to remember that everything in the world economy is already interconnected; thus, diversifying to new areas may not offer the desired benefit of diversification.

Using the $10 in new sectors will require assessing the strategic implications and the risk involved in the new sectors. Since sectors like education are still developing in their operational areas, there are opportunities and high risks. A highly talented and knowledgeable management team will be critical for the lasting development of ventures running at the pyramid base. That will act as a means in supporting the subsequent generation. Greater penetration in the current sectors and geographies will benefit the organization since it has been working in its present geographies for a few years and still exists opportunities to penetrate more within some sectors.

Acumen Fund should prioritize having a greater penetration in its existing sectors and geographies. Since it has not been in operations for long, venturing into other sectors and geographies may not bear much fruit. It should next consider investing in talent and knowledge sharing as this will facilitate its in-depth operations in the existing areas.

References

Hill, C. W. L., Schilling, M. A., & Jones, G. R. 2020. Strategic management: An integrated approach : theory & cases. Boston, MA: Cengage

Michigan Ross School of Business, 2008. Acumen Fund: How to Make the Greatest Impact. Case 1-428-592, WDI Publishing