• Friday, March 29, 2024
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Acumen eyes $100m investment in West Africa in short term- Novogratz

Acumen eyes $100m investment in West Africa in short term- Novogratz

Jacqueline Novogratz is the founder and CEO of Acumen, a nonprofit global venture capital fund whose mission is to use the tools of business to solve problems of poverty and build a world of dignity.

She was in Lagos, Nigeria recently and had a chat with Lolade Akinmurele, BusinessDay’s Deputy Editor, on topics ranging from Acumen’s impactful work across Africa, Latin America, South Asia and the United States as well as her investment target for West Africa in the short term.

Impact of Acumen’s investments

The first thing to look at is the lives impacted. From the $146 million invested, all of it backed by philanthropy, in 145 companies over the past 21 years, we have seen 430 million lives impacted. Acumen also manages $200 million in for-profit impact funds that add tens of millions more, impact that is evolving.

The second thing is that for every dollar that we take from philanthropy, we raise an additional $6 in co-investments from our investors. That means we have essentially moved about a billion dollars into markets that had been overlooked and underestimated for far too long.

The third is that hundreds of thousands of jobs have been created through the markets our investments have helped create or grow. In the case of off grid solar, we learnt what patient capital is capable of enabling. Before we invested in a single company – d.light – in 2007, there was no solar energy market for poor people. Acumen was the first. Our patient capital allowed companies willing to see low-income people as customers to experiment, to make mistakes, to try again. Over time, Acumen’s 40 investments in off-grid clean energy have helped build an ecosystem that is now a thriving market and part of the solution.

The final impact which is much more intangible but important is to build community in places where violence dominates and trust is low. We see business as a potential tool for peace if companies build local capabilities in wounded communities. Our investments have supported the fabric of divided societies to evolve, whether in Uganda, Colombia, Northern India or in Pakistan.

So that’s how I would start. The lives that have been impacted, the markets created, the money leveraged and the trust that is built.

Investments in West Africa to top $100m

In West Africa, I would like to see $100 million raised in philanthropy. We are now capable of deploying patient capital and we have the network and credibility. We understand what it actually takes.

We need philanthropy so that we can take bets on early stage businesses and accompany them for 10-15 years. I would also like to see Acumen Academy grow ten-fold as well. By year-end, West Africa fellows will number 100. They join a community of 1,300 diverse individuals from across the globe, all bound by common purpose. And these individuals who are focused on solving problems of poverty need mentoring and capital.

I would like to see Acumen Academy West Africa expand exponentially; and include a community of individuals who support the work – with money, mentoring, legal, financial and marketing assistance. The kind of change needed in today’s complex world needs all of us. There is so much talent in Nigeria – and so much change is possible when a community decides it wants to work together to support entrepreneurial builders grounded in a moral framework and an ethos that puts the vulnerable and the earth at the centre. Nigeria has all the talent it needs to solve its problems. And there is a generation of individuals who want to be part of building a better society.

Lessons learnt since starting Acumen

Ultimately, the biggest lesson we have learnt over the last 21 years is that the opposite of poverty isn’t income, its dignity, choice. It’s a question of whether you can have more control over your own life. Our companies, particularly the ones that are successful, focus on enabling more choice, more opportunity, more participation. Their customers gain more choice in where and how their children go to school, the kind of healthcare they can access, the kind of energy they have utilise in their homes. Dignity is hard to measure but in many ways it is the most important.

How patient is our capital? 10 to 15 years can sound like a long time; but looking backwards, it goes very quickly. Our problems are complex. They will not be solved in a year or two, but I’ve also seen how much change is possible.

Read also: Acumen injects $1.05m in Nigeria’s Koolboks, Sierra Leone’s Lizard Earth
Acumen-backed companies making a difference

One example is d.light, a solar energy solutions company.

In 2007, the company’s founders came up with a $30 solar lantern when there was no solar available and certainly not for the poor. We were one of the first ones to invest. I think all of us underestimated what it would take to build a new market for the poor. Solar didn’t exist for low-income people who were dependent on kerosene, diesel or firewood. Trust in a new fangled technology was very low. Financing didn’t exist. Neither did distribution systems. What did exist was high levels of bureaucracy, complacency and corruption. And diesel and kerosene mafias that were especially content with the status quo.

Patient capital gave d.light and eventually, other emerging clean energy companies the ability to see very poor people as customers, and to build services that worked for them. Of course, we had assumed that once a business model was proven, impact investors seeking financial returns would flock to the companies. But too many impact investors still seek high financial returns first rather than seek opportunities to invest where capital will make the greatest difference. So we built KawiSafi, a $68M for-profit impact fund. Between Acumen’s patient capital and KawiSafi’s growth capital, d.light has reached well over 100 million people with off-grid light and electricity.

BURN is a Kenya-based design, manufacturing and distribution company that produces efficient cooking appliances. Acumen was the company’s first institutional investor. BURN, like d.light, focused on low-income people as customers who deserved products that they would want to purchase and use. Their stoves reduce the use of fuel, whether firewood or charcoal, by more than 50%. Carbon markets have enabled them to reduce their prices. Today, the company has impacted more than 11 million lives; employed more than 1,000 people (half of whom are women); reduced 11 million tons of carbon and saved customers more than a half billion dollars

Another example is Ethiochicken, a company launched in 2010 that, after four years of research and trial and error, introduced its first breeder farm in Tigray in 2014. The two young co-founders put the smallholder at the center of their business model. The company incubates eggs, sells them in batches of a thousand to agents (who would often sleep in the same room as their baby chicks until they were big enough to lay eggs). Ethio-chicken also supports the agents with the right vaccines, feeds and training. Agents then sell egg-laying hens in batches of two or three to very poor farmers. Nearly a decade after we first invested, Ethio-Chicken has impacted about 20 million people in Ethiopia and created more than 1,000 jobs. Farmers’ incomes grew 20 percent. Government credited the company for helping to reduce childhood malnutrition by more than 10 percent. Our for-profit fund, the Acumen Resilient Agriculture Fund is now investing to take this effective business model to 10 African countries.

I could go on with examples of these great companies that I have literally watched grow from an idea or a business plan to change a system.

In India, we invested in a company with 9 ambulances to serve Bombay (Mumbai) with a population of 22 million: everybody laughed at us. This one venture capitalist said to me that this is the problem with you people, you think you are too smart; and what you do is too small. Today that company, in 15 years, has 3500 ambulances and has taken 50 million people to hospital. It has 13,000 employees and has set the standards and the policies on how ambulance services are done in India. And we exited with a solid financial return. All money returned to Acumen from our patient capital investments is reinvested in further innovation to solve problems of poverty.

Read also: FAAC disburses N760bn to all government tiers in September 2022

Moving the needle with the right capital, character and community

For me, the lesson of 21 years of doing this is that with the right capital, right character and right community, you can move the needle on a tough problem.

Acumen’s vision in off-grid electricity is to structure the right kind of capital instruments to enable private companies to serve the hardest to reach individuals with clean electricity – almost all of whom live on the African continent.

In 2006, 1.5 billion people in the world had no access to energy. We started with d.light and have since invested in 40 companies across the ecosystem from Sierra Leone to Kenya. Together, those companies have reached over 225 million people, giving them electricity. Today 800 million globally lack electricity. The majority of those individuals, almost 80 percent, live mostly in 22 sub-Saharan African countries, none of which have more than 45 percent electrification. This is where investment is needed – but we see too little going there. Acumen is thus building a structure that will incentivize private capital to move into some of these nations – and to stay there to serve people who are too often overlooked. We’ve seen that people who are given access to critical services like energy in ways they value and can afford will pay. And there are few services like electricity and light to change lives and enable dignity. Because I can see a sightline to SDG7 or universal electrification based on progress that we have been part of, I have renewed my belief in change grounded in entrepreneurship and in moral leadership.

How Acumen Academy is grooming next generation of leaders

About 7 years in, we started to realise that our companies needed talent to reach scale. More important, we came to see character as a major differentiator of those entrepreneurs who changed entire systems. Not only were they ethical and visionary but they were full of resilience and grit to stick to the work for years. So, we looked around to see what we had learnt from the best entrepreneurs. We tried to identify those character traits, to select for it, and to teach it. I believe that leaders are made, not born.

Acumen Academy, the world’s school for social change, identifies, links, supports and celebrates a diverse corps of entrepreneurial “builders” with the skills, will and moral imagination to tackle tough issues of our time. The Academy is an online platform for “anyone anywhere” to take courses and be exposed to insights from Acumen’s work. At the core of Acumen Academy is what we call The Foundry, a community of individuals who have gone through immersive experiences like the Acumen Fellowship in West Africa which selects twenty individuals each year across the region. The individuals are very diverse in terms of class, race, religion, ethnicity and geography. A single cohort might consist of individuals with Harvard or Oxford MBAs as well as changemakers from decidedly less advantaged communities.

One of my favourite stories is from here in West Africa. A guy, super impressive, with a Harvard or Oxford MBA came in and was sitting next to a farmer. He called his father that night and said “I think I joined the wrong programme, I thought I was joining a programme for its brand and I am sitting next to a farmer.” He later told me that he learned more from the farmer than just about anyone, and now they are partners.

The year-long program focuses on knowing self, building community, and understanding how systems change. Acumen Fellows share their life stories in authentic ways with one another. They learn to adapt to changes around them and to hold opposing values like profit and purpose in tension. They explore their values in different ways, including going through what we call “the Good Society” readings, an approach we borrowed from Aspen Institute. I just spent three full days with a Fellows cohort in Kenya. The diverse group reads and discusses texts from Plato, Hobbes, Chinua Achebe, Nelson Mandela, Havel and others. The readings are used as a springboard to explore values. The Fellows often tell us, “We have never had conversations like these. We don’t sit to discuss freedom versus community or equality.

Good Society discussions make Fellows more conscious of decisions they are making daily – and they see the trade-offs leaders are making, whether or not they want to acknowledge them. We teach that the question of Who Decides is itself a moral question. Is it a single authority figure or a group decision? We ask them to ponder trade-offs between the individual and community, between freedom and equality – in their societies, in their businesses, in their lives.

Another thing that the Academy offers is community. This work is so lonely. When you are the one saying I can build in a way that includes the poor and the earth, you are by definition unique in our world that values money, power and fame. You tend to see your friends taking “easier routes” celebrated for their wealth while you are struggling to fight the status quo. You are too often told you are “too idealistic”. Your parents may be disappointed because you are not manifesting traditional success and they can’t explain to their friends what you do. You need a community to say you are on the right path, to help celebrate your successes, to lessen the impact of your failures.

We are not going to change as a society until more of us decide that success is about the amount of human energy you release into the world. It’s about giving more to the world than you take. We are trying to build that community not just here in Nigeria and across West Africa but across East Africa, Pakistan, India, Latin America and the United States. Personally, I believe the innovation we are going to see in the world in our next chapter globally is not going to come from the traditional sector. It is going to come from places like the Nairobi slums, from Lagos, from Karachi, from the edges of our societies.

I want Acumen Academy to find the best innovations and share it with the rest. I dream of a world in which we do more to celebrate role models and business models that solve real problems. I see so much that Nigerians can teach. And I also see how Nigerians can learn from Pakistanis, for instance, or Indians or Colombians. We need to build this world together.

Read also: Meet the 2021 Fellows of Acumen Academy West Africa

I also think one of the critical skills we need as a people is to know how to transcend lines of difference. Not only the more evident ones but class, religion etc and that has got to be a part of the way we teach and expect our entrepreneurs to operate. The Fellows I meet and young leaders like them, all filled with what we call “hard-edged hope”, are the treasures of West Africa.

Inspiration for bestselling memoir “Blue sweater”

The book’s title refers to a blue sweater that my uncle Ed gave me when I was 10 years old. I am one of 7 children and didn’t get a lot of new things so I wore it all the time. Then in my freshman year in high school, I had an especially humiliating moment with a boy making fun of my sweater. I ran home and ceremoniously threw it into the goodwill of my mother thinking I would never see it again. Fast-forward 10 years to 1986. I am living in Rwanda and I saw the sweater on this little ten-year-old boy. I grabbed him and turned the collar and saw my name. I didn’t know where Rwanda was when I gave the sweater away in 1976. But we are so interconnected as a world. That was where the name of the book came from.

The Microfinance bank that I helped create ended up going through the Rwandan genocide. I had started with 5 Rwandan women, three of whom were the first women parliamentarians in the country. When the genocide happened, they played every conceivable role in the genocide: victim, bystander, perpetrator. Our first executive director was the Minister of Justice for the genocide regime. It was so devasting for me that people with whom I built an institution of social justice could literally have been the ones to plan a genocide.

I went back for three or four years in a row to try and understand. I sat in the prison for many hours. I would try to understand how it happened. I discovered in the end that angels and monsters live inside of every single one of us. Our monsters are our broken parts – shames and hurts that we try to hide, though it becomes easy in unstable times for demagogic leaders to pray on those wounds, to blame others and sometimes make us do terrible things. I think our challenge is to build those systems that bring out our angels and suppress the monsters.

It’s just too easy to say that someone is all good or that he is bad. You show me a good or bad person and I could turn them into the other. We all have the capacity for both. The real point is how do we build a world where all of us feel seen and we all have dignity. That’s the way the world would change.

Lessons on poverty reduction for Nigeria & Africa

The best policies that move the needle with poverty reduction around the world are the ones that promote structures that allow for entrepreneurship and innovation in a way that allows businesses to reach people. Where we sometimes let ourselves down is where something is actually working, whether it is a substitute for imports or cookstoves. Then suddenly an official sees this as an income generating opportunity for the government, rather than recognizing that when they let this really thrive and serve the poor, it will work best for the whole society including taxes.

A big issue is rising unemployment rates amid a fast-growing population. Africa is the only continent that will double in population in 30 years. The question is would you either let it go on an incredibly perilous path where these young people, who now will have smartphones and see what is happening in the world, have no jobs or opportunities or would you recognise that Africa’s youth bulge could be the greatest asset that the world could ever have.

When it comes to energy, we find ourselves so often having the wrong conversations. Should it be oil and gas, so that we can industrialise or should it be clean? This is a continent with enormous sun, wind and geothermal opportunities. The continent could be a net exporter of clean energy and do so in a way that actually makes it a low-cost provider based on building a clean energy economy. But we are so stuck in ideological battles that we are not paying enough attention to the innovation that is happening. The clean energy revolution is a huge opportunity for Africa. I see amazing examples just in Nigeria.

To fight poverty we must ask ourselves what the basics that need to be done are so that these young people can really have a chance to flourish and to support them in their entrepreneurial journey. It is so easy to focus on what is negative. What makes it into the news is the corruption, negativity and evil stuff. But we need more media to uplift a new kind of role model and hero who is not just rich or famous or powerful but who is working on changing their communities.

We need partners in the media to write the stories in ways that show these young people for the cool and amazing people they are.

A new generation is looking for a new kind of leader and that generation is here. I see them in every community, and they take my breath away. And they need support, recognition, patient capital and mentorship. We are looking for the right partners to join us in starting and implementing a moral revolution.

“Let that bull run”: Advice to young people seeking to make a difference

The first and most important thing is to just start. There are so many young people today who want to know what their purpose is before they start. But urpose doesn’t come to people waiting at the starting blocks. You find purpose by living into it. If you see a problem, say, for example, trash on your streets, just do something. Try to understand the problem. That first step will lead you to a second step. And then a third. Just start. And if you start and fail, then start again. Before you know it, you’ll be doing something with real purpose.

The second thing which I would have told my younger self is to believe in what you are doing and be bigger than you think you might have the right to be. Growing up as a young woman in my generation, I was taught to be polite and respect authority. In a way, I was taught by society to be smaller, even though I dreamed of changing the whole world. When I look back at the 26-year-old that I was, I would have given her permission to do more shouting from the rooftops. Don’t be afraid to be big. I often say that many of us have a bull and a dove inside us and they are always fighting. The bull is that aggressive part that wants to change the world and the dove is the loving and quieter one. Let that bull run sometimes. And temper her with your dove.

The third thing would be finding your community, your tribe. My grandmother always said, “Show me who you walk with and I will tell you who you are.” The converse is that by finding people you want to walk with, you become more like them. When you fall down, they’ll pick you up. When you get too big, they will hold you to account. And they will remind you that you are not crazy. You are not alone. Indeed, the world needs you to shine your light in service of others. Find a community that will make you be your better self.

You do those three things, you are good.

The one regret I have after all these years? I wish I had gone faster.