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Acumen Fund and Embrace

Traditional vs. Nontraditional Revenue Sources for Nonprofits and Social Enterprises.

ania calderon

on 5 March 2013

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Transcript of Acumen Fund and Embrace

Acumen Fund and Embrace Leading Edge of Social Venture Investing Case for a HYBRID organization The Acumen Fund Perspective Pros vs. Cons Should Embrace remain a nonprofit or
adopt a for-profit or hybrid structure? Pros Non-Profit Cons Simple structure, low overhead
Others are more willing to collaborate with a nonprofit than with a for-profit business
Access to grants and funds
Easier to get publicity as a nonprofit
Easier to get volunteers for clinical testing Challenge to become self-sustainable
Difficult to get foundations to donate funds for product development
Difficult to offer economic incentives to employees
Acumen could only provide Embrace with debt capital as a nonprofit (average about USD 500,000) Pros For-Profit Cons Simple structure, low overhead
Ability to raise more substantial funding through equity investors,
Allows organization to perfect product and reach more poor people quicker
Less dependent on one source of income, more sustainable
Economic incentives makes it easier to attract quality employees Harder to justify research for non- commercial areas
Harder to take risks and develop technologies specifically designed for low-income markets
Goal of maximizing profit may stray from mission
Difficult to attract staff that is as committed to Embrace’s mission
More difficult to work with some partners
Limited access to grants Pros Hybrid Cons Raise capital from traditional financial sources and not be dependent on a single one, making it easier to reach their 5 million USD goal
Acumen can provide more funds as equity investment (USD 750,000)
Focus on mission while offering economic incentives to employees Complicated structure, higher overheads
Difficult to convince sectors that social mission is still as strong as a non-profit
Many hybrid structures have failed
Need to make clear distinctions between the for-profit and nonprofit operations
Ethical concerns over using grant to generate profit "Between pure charity and pure financial returns, there is an unexplored space with tremendous opportunities for innovation, social impact, and lasting change." Why Hybrid? A hybrid structure gives the organization the best of two worlds:

Allows Embrace to raise capital from traditional financial sources (allowing Embrace to perfect their product quicker)
Maintains some of its benefits of being a nonprofit organization (still being able to pursue grants and its mission to reduce the number of infants dying due to low weight). Why Acumen should pursue an equity investment if Embrace becomes a hybrid organization. Able to raise capital and reduce its dependence on donations, making it more likely to serve more poor people and reach long-term success.
Embrace Infant Warmer is developed to improve the health sector, which is one of Acumen’s key areas.
It is in Acumen’s interest to invest in market-oriented approaches that serve to alleviate poverty.
Acumen is particularly interested in investing in businesses that develops new technologies to allow production at substantially lower cost.
The Embrace Infant Warmer product is cutting edge.
Acumen can provide financial capital and management support to help Embrace scale up. Reasons for Investing Quality & Integrity of Entrepreneur / Social Impact / Financial Sustainability / Demonstration Effect
Similar to other VC: business model, finances, management team, marketing strategy, competitive landscape and sector dynamics
Will parents and hospitals buy-in?
Other impending factors in global health? i.e. subsidies What will Acumen need to see from Embrace
before making a significant investment? Long-term social impact as return
20-35% equity ownership in exchange for investment
Low-income populations should benefit from the product by reducing cost structures and improving quality
Positive reach of at least 1 million people within 5 to 7 years
Become financially sustainable–self-supporting–within 5 to 7 years What social and/or investment
return should Acumen
expect if invest in Embrace?
Full transcript