2 March 2007

Venture philanthropy fund uses design thinking and ethnography to help solve real-world problems [Business Week]

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Acumen Fund
Billing itself as a nonprofit venture capital firm, the Acumen Fund uses the principles of design to solve the problems of the poor. Just as the Procter & Gambles and Motorolas of the corporate world conduct extensive ethnographic research on consumers, Acumen finances companies that create from the bottom up. Instead of shoppers at a Los Angeles mall, however, it begins with people in villages like those in Thathia, a tiny village in Kannauj, India.

“Start with the individuals,” says founder Jacqueline Novogratz. “Build systems from their perspective. Really pay attention, and then see if they can scale.”

Under Novogratz’s leadership, the New York-based fund manages $20 million in investments in companies that fall within three portfolios: health, water, and housing. It’s not a lot of money compared with any of the traditional venture funds in Silicon Valley. But Acumen’s goal is not to launch initial public offerings. Rather, Novogratz and her team are building prototypes for new business models that measure returns in social benefits as well as monetary rewards.

Observing customers to uncover their unmet needs, creating prototypes of new products and services for them, iterating and improving those until they work, looking for new business models—these are all the critical fundamentals of design that Acumen uses in its work. At a recent workshop given by Tim Brown, chief executive of the innovation consultancy IDEO, these same principles of design thinking were inculcated in eight Acumen Fellows, the young professionals the venture fund sponsors to work with its companies in Africa and Asia.

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