 We're going to dive straight in with Rick. Rick, Acumen's been at the nexus of impact investing at the point at which philanthropy and investing collide. And to bring us right back to the beginning of where our two days here fitted with David's and Anne Kevin's analogy about seeing through two lenses. So, you know, you guys seem to be experts in being able to look through the lens of investing at the same time as looking through the lens of philanthropy and dealing with the contradictions that brings up. So, by way of intro, tell us what inspired you to get in touch with Monitor and start working on this project. Thank you. There are a number of reasons for us why we basically wanted to have this report. First of all is over the last years, we've seen a whole lot of reports coming out. The 2010 GP Morgan Report is kind of the best known out of that, basically talking about that there is a lot of interest from investors to invest into social enterprises, providing social goods, and generating basically market-based returns at the same time. And we are as excited as everybody with this increased interest, but at the same time with every new fund which is being created, we ask ourselves the question, is there enough pipeline to invest this money? Is there the absorption capacity? We also ask ourselves the question, are these promises of market-based returns, are they realistic? I mean, having a look at our own portfolio and basically our own performance. So, last year we celebrated our 10th anniversary and that's always a good moment to reflect and to look back and see what we've done right, see what we've done wrong, what are the lessons learned that we can basically pull out of these 10 years of experience doing these investments. And one thing that struck us while we were having a very good look at our portfolio is that a lot of our portfolio companies benefited during their life cycle at one stage or another, they benefited from grants or subsidies in one way or another. So, we ask ourselves, okay, what is basically the role of grants philanthropy in impact investing? First of all, given the reality that we see within our own portfolio and at the same time giving all the interest from investors that is looking to invest into social enterprises. So, those are the reasons why we basically got into a discussion and engagement with monitoring inclusive markets to understand basically what is the role for philanthropy grants in impact investing? Is there a role and what is that role and how should it actually play out in reality in practice on a day-to-day basis while making those investments? So, with the support of the Gates Foundation, we were able to engage monitor to basically help us understand this role for philanthropy. Okay, just one quick question to the tech. Are we doing slides? Can we switch over? Yes, please. So, Harvey, tell us, how was it for you? It was great. We were delighted when Acumen came to us and really that's because that sense that philanthropy was critical was so our view as well from working on the ground. In India, trying to get low income housing start, trying to get clean drinking water started, but also the research that we've done in Africa and India really kind of brought that to light. Let me just stand for this one. Yeah, fine, go ahead. So, the reality check for us was pretty important, right? When we looked at the businesses that we studied in Africa, my colleague Mike Kobzansky led this huge study in Africa, looked at over 400 promising inclusive businesses in nine African countries and all of the 439 actually very few were viable in scaling, right? So, I think it's 10%, just over 10% were viable in scaling. And of those, I think only 10 or 15 we shortlisted for the investors that had come to us and said, could you please find us some companies? And of those companies, they weren't making huge profits either. They were making net margins in the region of 10% to 15%. So, not quite the rosy picture of huge profit potential that some had been led to believe. The other thing that we hear a lot about is investors coming to us and saying, it's actually really hard finding deals, right? And we keep finding these companies that everyone else has put money into, right? We're all piling to the same businesses. And we were intrigued to see this report also from JP Morgan last year, which said actually, the main concerns of investors at the moment are shortage of opportunities, right after lack of track record, which you'd expect in such a young sector. And Acumen's experience really reflects this too. So, despite being very selective, as you can see in their investment process, despite a lot of effort in capacity building and supporting businesses after they invest, they're not making tons of money, right? So, the most successful investors are making 6% profit after tax. And they're only expecting a 1x return from the portfolio, which is, of course, in line with what they state to the market, but that's hardly kind of raking in big bucks. I think what's interesting for us when we look at this is if you look at the companies in the Acumen fund portfolio, they are pioneers, right? They're not just any old company working in the inclusive business space. These are people, and Acumen seeks them out. They're trying to solve problems, really tough problems, in new ways. And we thought, actually, from our research, we understand why this is so challenging, right? So, not only do they operate in a very tough environment, not just limited spending power, but also underdeveloped value chains, underdeveloped demand, poor infrastructure, poor regulation. They also need new models, right? So, you can't take a model, as we know, that serves the top of the market, top of the pyramid, and just deploy it in the bottom of the pyramid and expect it to work. So they have to actually develop these new models and prove them and establish them in a very tough environment. And then the final thing is actually often what we take for granted in developed market context just doesn't exist in these communities. So you've got to develop and assemble whole value chains. And my colleague, Mike, has a great quote. He says, you know, imagine if Google had to build the internet first, right? That's the kind of thing we're trying to do here with some of these businesses. So no wonder it's tough. And so for these pioneers, we see it really as a high risk and low return proposition, which is not very attractive. And in fact, not just not attractive, but actually sometimes the economics don't even work for a one X return because you don't make enough on the ones that make it to pay for the ones that don't. And so we thought, you know, let's think about where this problem exists and where we can provide more support. And as we talked to Acumen and looked at the portfolio, we realized that actually what people talk about mostly are the kind of ends of the journey, right? We talk about innovation on the left hand side, creating a blueprint, the business plan, the idea, the technology. And then we talk about scaling. And there is a lot to do in between these two ends. And I'm going to spend a minute describing what they are. So the first thing is you got to validate this blueprint, right? You've got an idea, you've got technology. That is not a business. You got to make sure you run it in the market, charge customers a sustainable price for it, see if they buy it, see if it makes money. If it doesn't make money, it's not a business. So there's a lot of effort has to go into validate and often you don't get it right. I mean, you never get it right first time around, right? So it takes a few iterations of that to really get it to gel. And but even after you get to viability, there's this thing called prepare. And it comes back to the observation about these markets not being highly developed, right? So the demand might not be there. It might be a highly beneficial product, but customers may never have bought it before, may not have known anyone who's bought it before, may not know the benefits of it. How are you going to create that demand? There might be infrastructure that's missing. You know, how are you going to get this to the customer? How do you source stuff from the producer to you? Who's going to pay for that? And as we looked at it, we thought, you know, these are actually very, very tough challenges. And often it's not economic for the business or for the investor to take on this cost. And also if they take on the cost, they may not reap the full benefit of it, right? So you may pay for demand to be created, but then what's going to come in is all the other copycat competitors are going to come in and actually sell to the demand you've just generated. So you may not recoup that as a private investor. So lots of challenges along the way. When we spoke to investors, most of them said, actually we want to invest at the right hand side of this, right? We want them to be making money. They've shown unit break-even, demand exists, infrastructure is kind of on its way or it already exists, then we'll put the money in. And so in a very young field where most models are unproven, right? And many people kind of suck on this left hand side, there's a real gap. And that's what we call the pioneer gap. When you're trying to establish new models and new markets to solve tough problems, you need to provide the support in the earlier stages of the journey in order to get to the right hand side. And it's a problem obviously for impact capital that's trying to invest in these new solutions. It's also a problem for us, more general philanthropy generally, it's trying to find more sustainable solutions to some of these problems. And so what we're calling for is really more philanthropy. We're saying that the rise of impact investing, the growth of impact investing actually requires more, not less philanthropy in this space to develop the models and establish the markets into which this capital can then flow to drive change at scale. But I think we'd like to go to a real example now. So one of the examples that we bring up in the report is the great work that Shell Foundation has done. And in fact, this is a story that in various forms has been talked about over the last few years. I know that Jacqueline from Nevergrats from Acumen does talk about Husq Power quite a lot and does mention Shell Foundation as part of that. But I don't think we've ever gone into depth about what their role was and how they actually helped create this business. So I'd love to invite Simon to talk about Husq. Thank you. Can I get a show of hands in the room of who has heard of this company before, who is familiar with Husq a little bit? Okay, so most. What I'm gonna try to do is just in about five minutes, just take you through the history of this business from a funder's perspective. And at a high level, what this company does is right now they're operating in India, they take waste biomass, so waste rice husk, which is a shell around the rice kernel that we eat, which is a genuine waste biomass in the world. And they generate electricity from it using biomass gasification. They sell that electricity to communities on a pay-as-you-go basis for an amount that is considerably less than what they'd have to pay for kerosene, for example, which is the substitute. And critically, they also provide a reliable source of power, which is almost as important as the affordability issue of it. So back in 2008, Shell Foundation was looking where we were looking for interesting disruptive businesses in the access to energy space. We believe that energy access is a fundamental prerequisite to wider socioeconomic development. You can't have modern healthcare provision without energy, you can't have modern education services without energy, et cetera, we go on. So without that basic service is a huge impediment to growth. In a country like India, where between 40 and 60%, depending on how you measure it, percent of the population does not have access to reliable, affordable electricity. That is a 400, half a billion person gap, which is massive. So when we came across Husk, this was a company set up by a couple of very, very bright engineers, Indian engineers, and they had about two or three plants, power plants up and running. One plant can power about 500 households to give you some perspective. But that's all they had. And the business had huge dreams of scaling, but we knew that to get the business to a point where it could become investable by the likes of Acumen and others, we had to put in a substantial amount of both funding support, by the way of Grant, we're an enterprise-based philanthropist, so we use Grant as an instrument, but equally a huge amount of capacity building outside of the financial instrument. So they needed capacity building in terms of technical support. How do you build a plant more efficiently? How do you find quality senior management without having a revenue stream to pay for it? They needed a huge amount of R&D assistance as well. So you had all these fundamental parts of the business that needed a massive, massive amount of support. And I think we can pretty clearly say there was market failure there. Nobody else was doing this. So we came in and funded the business pretty substantially for the first year or so until 2009-ish when it then became funded by a consortium of impact investors, including Acumen, who led the round. And further to that, after that initial investment by investors, we continued. And in fact, we increased our support as a foundation substantially, and we're still involved in the business, but we've just altered how we deploy Grant. We're no longer paying for CAPEX or actual building of power plants and core operating expenses. We're actually building more strategic parts of the business, so long-term R&D training capacity building. So it was that kind of role that we're now playing with the business. And it's a kind of role that Shell Foundation as a philanthropist plays across our different programs, not just with Haasq Power and others. So, and I guess we'll get into this more, but we had, at the outset, our role as a philanthropist was to bring the company, was to validate the business model and get the company to a point at which they could become investable by the Acumen fund and others. So we were actively looking for others to get involved and take a financial stake in the business. Okay, so can we talk numbers briefly? Sure. And I'm sure the impact investors in the room will be interested. So what in the early stages was the level, roughly the level of grant funding that came into Haasq? Yeah, in the early stages, we put in about less than half a million dollars and we've now scaled up between 2009 and currently we've committed a little over 2.3 million US. Okay, so the half million dollars got Haasq to a point where Acumen could come in with its consortium and what sort of level, what sort of level was that consortium coming in at and on what kind of terms? I mean, this is a bit boring, but it's kind of interesting to see the continuum because it maps, I think, against diagram. Before I get into the numbers, I think it's important to say that at that stage, the company had about eight power plants, which is still very little, in terms of revenues they were generating. So it was still, from an investor's point of view, a very high-risk business, especially if we think that the break-even point for this company is quite a few plants away from that. So it's early stages of validation in your model? Exactly, it's very early stages. So the total amount at that point was invested in that the company was asking for was 1.2 million. And we had a discussion internally within Acumen in terms of, okay, the risk profile and given our resources that we have, how much money can we do? Can we take this round completely or shall we try to kind of syndicate this to other investors, which we did? So Acumen at that point invested 325 and we syndicated this together with like-minded investors and I think it's important to say also like-minded investors. We had LGT coming in, we had Bambo Finance coming in. What does like-minded mean in numbers so that we can get an idea of what that continuum really looks like in hard cash? They all invested the same amount as Acumen fund so basically the 1.2 million was split into four. And this is all equity? This is structured as a convertible. Because it's India and you have to go in with a convertible debts in India but that's very boring. Exactly. Okay and what was the expectation in terms of what you would be looking for from that? In that consortium, very different from Shell's expectation which is hey, it's minus 100, I've just given it away. But our perspective initially was and that's basically our starting point for every investment that we make is basically it's the social impact. Given the fact that Acumen fund is predominantly philanthropically funded so we don't need to return the capital back to investors. We don't have a limited timeframe in which we have to basically generate that return and get that capital back. So that gives us basically and which is what has led Acumen fund to develop the concept of patient capital which is basically higher risk, longer term perspective. A lower return. And well, first focus basically on impact and financial return comes in a second place. If it gets there, good. But it is important as we invest that we are convinced that this company ultimately will get financially sustainable. But patient capital when Jacqueline founded Acumen fund initially she had in mind that this would be around 70 years. Part of the 10 year exercise that we did is that we're realizing that patient is gonna look more like 10 to 15 years. Patient is really patient. It is really patient. So where's Husqnow in terms of its needs, financial and support? So I'm just, I'm pushing along this continuum before I try and take you guys out. We did that first round and basically that 1.2 million has enabled and allowed the company to scale up to about 75, 80 plans they have today. And we are actually working now on the next round. And that size? That size is gonna be 5 million. And the kind of investors? We'll see. But so hang on, there's something fundamentally strange here. You're coming with grant money and you're subsidizing investors coming in. So you're distorting the market, you're crowding investors out? Right, so it's actually an issue that we've been asked before. And it's a good one to talk openly about. So we, as a foundation, number one, we never subsidize the end price of the product or service. So we never, we don't distort the price at which an end consumer would buy a product or service. That's number one. Number two, we get involved only with businesses that cannot attract commercial funding yet. And number three is that we work very actively with next stage investors and with the entrepreneur to help them get to a point where they can attract commercial funding. So when we got involved with Husket, had it not been able to attract funding already by investors, we wouldn't have had a role to play as such, or at least not as an important one. So we certainly don't take away business from investors. I think that would be the fundamental thing. And the other point you raised around putting just grant into a business at the risk of being provocative, I think we see ourselves as a pure philanthropist in this space. So Shell Foundation is after a social impact, not a financial return. So, and I will look at it this way, if Rick and the promoters of Husk and the other investors are able to make a significant financial return or any financial return off of an investment like Husk, that necessarily means that we will have done our job as a foundation. It means that we will have created a business that was able to generate a financial return and therefore, by definition, at some degree of scale as well. So to us, that is a good thing. We do not shy away from, and we'll state it openly, I'm actively looking to help Rick and the other investors in Husk make a financial return long-term and in the process, get a generated return for the other promoters. I mean, this epitomizes this binocular vision and this ability to see through two lenses or not. So on the one hand, you're addressing market failure, but on the other hand, you're effectively handing philanthropy to investors as a return later on. Well, we see ourselves as generating social impact later on and if one of the byproducts of that is that the promoters of a business or the investors who are involved are gonna make a return and I think we're just comfortable with that. What I see sometimes is you have foundations that have a bit of an identity crisis where they're not sure whether they see a good opportunity and suddenly think, well, well, then we must surely take an equity role or use a convertible grant or a recoverable grant which is fine, but it's not a grant. Those are different instruments and they are, I think, appropriate where an organization is structured to generate a financial return on their investment. That's very difficult. So again, I see this really interesting contradiction or paradox, which is on the one hand, I can see impact investors putting bugs in your office and following you around, trying to prey on you and extract from your arterial veins the grant funding that you give out so elegantly and so well, but on the other hand, I can see thoughtful, honest impact investors working with ethics and integrity actually partnering and working. I mean, what's the reality from the studies and from the reality of Acumen and from the work of Monitor? I mean, are we looking at giant vampire squids coming into our space or are we actually looking at harmonious ecosystems being built? I think it would be the latter. Or at least I would hope it will be the latter. Well, it will be both, I would imagine, but it's interesting lessons for us, hey? What we're seeing, and I think there is a very interesting parallel that can be made with microfinance. If we look at microfinance, and if we take Grameen Bank as the founder of microfinance in 76 or something, it took them 17 years to break even. If we look at 17 years of basically pioneering, testing out, failing, testing, failing, testing, failing, testing, they had endless rounds of trying out the business model, defining the business model, and then ultimately getting the business model more or less right. What you see is that the microfinance institutions that started on later, that that whole period of breaking even got shorter, because the business model was proven, the business model was being tested and was there, and could be replicated in other places. But it basically took kind of like three decades to build the microfinance sector to where it is today. And during those three decades, estimates are that in the sector of microfinance there went in about 20 billion in grant funding in subsidies. Dollars. 20 billion dollars. 20 billion dollars. That was billion, not million. Absolutely, billion. Supporting that innovation, creating the ecosystem, which is very important, and what we see in whether it's about energy, whether it's about water, whether it's about agriculture, whether it's about education or all the various sectors is that they are not enough proven business models. Basically they are very little proven business models. We aren't even sure if those business models are proven today. And as Harvey has indicated that there are so many obstacles in the environment that these entrepreneurs have to deal with, that it actually makes a lot of sense to have an investment go hand in hand with capacity building. Whether that capacity building goes directly to the entrepreneur or is benefiting a whole sector, it actually makes sense, especially if you do it from the starting point, that what you look for is having impact. Okay. Harvey. I think it's a really important question because we do get this all the time. Why are we using philanthropic funds to create something that then spins off returns for other people? And I think there's a general answer to that and then there are ways that we can finesse the specifics. So I think in general it's what Simon said. You either are comfortable with the principle that here you're generating impact by creating businesses that attract capital that has a cost or you're not. And if you are comfortable with that then that's the kind of goal you're kind of rowing to. But I think within that there's a lot that we can learn from the work that Simon and Shell have done on what situations you deploy that money into and how you do it. And I think what was really interesting in doing the study was actually kind of digging into that with Simon and kind of laying that out and with Husk and kind of laying it out and saying, actually look at what you put money into. In the validate stage you realize that actually what they had to do was prove that they could replicate plants at a certain cost, cheap enough, fast enough, safely. Those were the things that you put money into and it wasn't a slush fund for the firm to use as they wished. You were helping them progress through the validate stage. And then in prepare, realizing that actually the workers to start these things don't exist so we've got to invest in training the workers because there's no industry going to think about health and safety and all those things that will help it longer term. So really kind of being specific about how it's targeted so it doesn't end up being some general price subsidy. Yeah, I think that's right. And I think the way we structure our grants is entirely milestone based which to some seems like a no brainer to others it's a new concept. So we'll tranche our grants with very, very specific objectives in mind that are often co-created by the entrepreneurs themselves. So they'll come to us and say, this is what we think we can get done. And now as a foundation actually more broadly outside of Husk we're actually starting to engage with investors at the beginning stage and we'll go to a potential investor down the line and say, what would it take for you to invest in this business? What would be the main milestones that you would need? And then structure grant or grants to get the business to that point and then exit which is the crucial bit. So, okay, so huge wake-up call strikes me and needs to be publicized at the same level that the JPMorgan report saying, hey, impact investing is here. Trillions await us. Glory and gold at the end of the rainbow. I'm being told we need to wrap up so I'm just going to finish with a succinct and single question different for each of you slightly which is what's next in this space? So what's next for Acumen? What's next in terms of data information, resources that are needed and what's next for funds in this space? And quite quick because otherwise I think somebody's going to come and lynch me. For Acumen fund this basically means that we need to redouble our efforts in supporting these enterprises in these early stages. I think Acumen fund is uniquely placed in order to play this role given the fact that our funding is philanthropic. So we can take that higher risk. We can be more patient. We can basically deploy this patient capital but we realize that we need to focus that way more on these early stage companies in these early stages and that we need to have that go hand in hand with capacity building which is absolutely necessary and to have that go hand in hand. Good, Harvey. I think for us one of the great things about doing this was the great honesty that we had from Acumen and from the other people from Shell and other people that we engage with and I just think there has to be more of that. So I think we need more of a discourse going forward that actually says look this is risky. Risk means there will be failures and there will be setbacks. We don't talk about those. We talk about how everything's great. All these businesses are fantastic and they're scaling and you look at them and you're like okay, they're not. So we do need to embrace that risk a lot more and think just be open about it and I think hopefully reflect that in research but also in our conversations going forward and also I think start to expand the view. So I know we've kind of done this study on a kind of very ventures basis. We've looked at companies because we worked with Acumen but actually I think the great opportunity for philanthropy is to take a much broader view than that and actually Shell's done some of this too with Cook Stoves and thinking about markets and ecosystems. How do you build the field and build markets rather than just build ventures? So I'd love to see more of that. Great. Simon. Yeah, I'm hoping that it's a hope that the discussion in the space is going to move towards a place where we're going to have much more philanthropic money coming into the social impact space and that the understanding of how and where grant is appropriate and where it's effective and where it's not becomes much more understood. I think subsidy is still understood as somehow market distorting or somehow not appropriate and if we're really after enterprise-based solutions then surely grant isn't appropriate or it's a strange instrument to use when in fact as we've talked about I think it is absolutely vital to scale this industry and I think if the more folks that get in and are honest about what they're doing in the space if they're genuinely after just social impact to change the way that they deploy capital or change the instrument that they use to support businesses I'm hoping that in 10 years from now you're going to have a spectrum of both impact investors as well as philanthropists that are using donor funds in terms of a smart subsidy as opposed to a market distorting one. Great, so in a single sentence double down, work harder, get it all on the table, be honest and as they say in the wire, in the Baltimore drug trade re-up, get more money on the table. That's it. Great. Guys, before we say thank you I'd just like to point out that this act will be repeating at Socap 12 on the opening night, on the opening stage in the style of freestyling and we're going to go out and take some lessons right now. Thank you very much.