| Follow Us: Facebook Twitter Youtube RSS Feed


Shrewd charity: How Toronto+acumen aims to reduce poverty with venture capital

For most people, the idea of a venture capital fund working to eliminate world poverty seems like, to say the least, an oxymoron.
But traditional charity work also struggles against the perception that aid can maintain poverty, strip dignity from recipients and prevents them from bettering their own lives. Is it possible to create an approach that leverages the spirit of charity and the efficiencies of entrepreneurship to help people in developing countries help themselves?
The people behind the Acumen Fund have set out to prove that there is a middle way. Founded about 10 years ago, the non-profit global venture fund has invested $73 million in "social venture capital" in the developing world through 65 enterprises ranging from an ambulance fleet in India to a solar light manufacturer whose product can replace dangerous kerosene lamps to a product in Nigeria that determines whether a medication is genuine or counterfeit. The Toronto chapter, officially called Toronto+acumen, joins offices in New York, India, Pakistan and Kenya, and 15 other chapters to raise money and support global projects that improve people's quality of life through entrepreneurship.
Just two years into its mandate, the volunteer-run Toronto chapter is working to expand the approach beyond the developing world to funding for projects in cities like Toronto as well. For Tanya Rumble, one of the executive members and, along with Justin Pintwala and Hima Batavia, one of the Toronto co-founders, Acumen's mission and strategy had genuine sex appeal.
"Acumen understands that neither traditional aid nor venture capital will solve the world's problems," says Rumble. "Acumen looked at how they could make an impact marrying business skills to charitable investments. It's about 'patient capital.' There will be a return on those investments, but it will be over a longer period. And the idea is that any returns will be recycled back into the fund."
Rumble, whose day job is associate manager of community engagement for the Ontario Heart and Stroke Foundation, had long been a volunteer for various charities. But she was becoming disillusioned with the way those charities were operating.
"I felt that giving back was extremely important to me," she says. "But I had always wondered how important my volunteering was. I was wondering if there was a better way. I was really tired of seeing these destitute-looking individuals on TV on Sundays. I didn't like the way these people were being portrayed. I have been to some of the poorest regions on earth and the people there have incredible imagination and tenacity. They can change their own lives if given the chance."
Rumble learned about the Acumen Fund when she in New York in 2009 (she was getting her Masters in Integrated Marketing Communication for Behavioural Impact in Health and Social Development). She saw in it an opportunity to address her concerns about existing charitable models. After a lot of chatting—online and, upon her return to Toronto, in person— the founders had more than 100 people turn up to the first Toronto event.
"I've always felt that there's a place for the business community, a role for the corporate sector to play in philanthropy. Of course, it's easier giving people a fish than teaching them how to fish," she says. "But the venture capital model can work. There's also income being generated, jobs. It involves people who have skin in the game. It's a much more sustainable impact versus giving people sacks of food."
Pintwala says it's an emphasis on encouraging local entrepreneurship that attracted him to Acumen.
"The best way to eliminate poverty is to stimulate entrepreneurship," says Pintwala. "When you find the right people who have the right motivations and ties to the right country, they can do great things. You're not giving them free money."
The Acumen Fund accepts donations from individuals and corporations, and has developed a system to quantify return on investment, including the social good that was done. It's held two fundraising events called Dignity in Focus, a photographic auction and exhibition. The two events— with another scheduled for October of this year—have raised $20,000 for Acumen here.
Until now, the fund has focused on health, housing, energy, water and agricultural projects in Africa and Asia. But now the fund is looking at investing in projects in the developed world, including possibly in Toronto, both as a chance to help local organizations and as an educational opportunity for members.
This spring, the Toronto chapter, along with three others including Vancouver, put forward a proposal to the parent fund to invest $50,000 in a local project that provides help to those who need it while also generating revenue. The Toronto chapter proposed investing in Home Ownership Alternatives (HOA), a non-profit that works to help low-income families, mainly in the Golden Horseshoe, buy homes. (Read more about HOA in the sidebar below.) In the end, the parent Acumen Fund decided to put that money into an organization proposed by a chapter at the University of Pennsylvania's Wharton School of Business (details of that project haven't been released yet). Though disappointed, Rumble and Pintwala say this is just the beginning of adapting the Acumen model to local investment.
"This is a sort of pilot to see if this will work in a developed country," says Rumble. "The idea is that high-performing chapters could test the model in their own communities, in a developed world context. It's quite small, but it's offering an opportunity to pressure-test this model. We want to get our hands dirty, get to see our model in action."
The process itself can help the Toronto chapter better prepare for possible future local investments.
"I imagine we will spend considerable time documenting the learnings from this pilot as a chapter, and designing and implementing ways to transfer this knowledge with members of the Toronto+acumen and the wider social finance community in Toronto," Rumble writes.


By Krishna Rau
When Toronto+acumen went looking for a local project to invest in that would create a social good and a return on investment, they grew keen on Home Ownership Alternatives (HOA). The organization functions as an investor for home construction, and then as a mortgage provider for families who need financial aid to purchase one of those homes.
"We provide the equity investment for new home contractors," says HOA vice-president Joe Deschênes Smith. "We put up money to buy the land, the advertising and promotion, everything a normal at-risk developer needs. When the project is complete, we take a normal development profit."
When the houses go up for sale, HOA provides second mortgages for those who need the additional money for their purchase. HOA is also able to access federal, provincial and municipal loans to make that second mortgage bigger for those families who require more financial aid. While HOA housing developments are open to anybody, and encourage mixed-income residency, those larger second mortgages are open only to those families who fall below the median income for the municipality.
"It's really for modest income families to bridge the gap to those who really want to own their own homes," says Deschênes Smith.
HOA makes its money, eventually, from repayments of the second mortgage, which comes due when the house is resold.
"We own a share of the house, we share in the appreciation. The owners pay us back the mortgage and their share of the appreciation in the house."
Deschênes Smith says HOA has helped build 2,300 units over the past 10 years, and are currently financing another 1,200 in 11 developments. They have projects in cities including Guelph, Kitchener, Pickering and Kingston. And in Toronto, there are developments built or being constructed in Scarborough, the Distillery District, Keele and Dundas, and Bathurst and Lawrence among others.
Krishna Rau is a freelance writer and editor based in Toronto, with a particular interest in social and political issues. His work has appeared in numerous publications including The Globe and Mail, Toronto Star, Report on Business, Now, TorontoStandard.com, This Magazine, Xtra and Canadian Forum. He also has a chapter in the recent anthology, White Riot: Punk Rock and the Politics of Race.

Images three through five are projects by Home Ownership Alternatives, courtesy of HOA.
Signup for Email Alerts
Signup for Email Alerts