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Jul 3, 2013

Acumen Fund lessons parallel design of Community Investment Network of Central Ohio

Brian Trelstad and Robert Katz from the Acumen Fund wrote of their experience in supporting social enterprise and impact investing.  Its title is “Creating a Capital Curve for Social Enterprises.”  They posed the question How should philanthropists and impact investors deploy their capital to achieve the greatest impact? They used  the story of an Acumen Fund investee company to answer how investors can help social enterprises navigate the path towards scale and sustainability.

They concluded with the following observations, which I believe are critical.

1.  Be realistic about expectations; the social vs. financial return tradeoff inherent in social investing is hard to quantify but present in every deal

2.  Investible companies are not knocking down the door, so think long-term – you’re building the pipeline of future investments

3.  Consider coupling an impact investment with a grant, either with your own money or from others, to help develop business plans and provide technical assistance to make enterprises more investment-worthy

4.  Be considerate; social entrepreneurs often won’t have the spreadsheets, analyses and fully fleshed-out business plans mainstream investors have come to expect

5.  Think about pooling your capital with other investors who have developed the expertise and can do the due diligence for you

6.  Be patient; social enterprises are slow to scale up.

These lessons are identical to the principles that have guided the design of  the Community Investment Network of Central Ohio (CINCO).  I have been very mindful of the need to pool the resources of many investors and to ensure two funding streams: a grant stream to build a pipeline of investments and a capital stream to start the new enterprises.  CINCO investors make a charitable contribution, matched by institutional grants, to develop business plans, provide technical assistance, and build a pipeline of investment-ready enterprises.  As a member LLC, CINCO will pool the talents and capital of many individual investors who can provide expertise and support in due diligence.  CINCO also seeks institutional loans to CINCO to supplement the members’ capital.

The design of CINCO incorporates the lessons learned by Acumen Fund.  We need to make CINCO work.  You can help by subscribing as an individual investor and encouraging foundations and banks to support CINCO through grants and/or capital.  Email NPInnovation@linkingmissiontomoney.com to be part of this best-of-breed new fund.