Editor’s note:
Brian’s Monday post, “How to Value Social Enterprises“, generated some excellent comments. One commenter in particular noted the importance of the Best Available Charitable Option (BACO), a valuation methodology Acumen uses to evaluate social impact. This comment, from Premal, spurred further musings from Brian on the issue of social enterprise valuation, portfolio data management, and the “base of the pyramid” space in general. What follows is Brian’s response to Premal’s comment.
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Premal,
Thanks for the post. BACO is a helpful tool, but we would love to do away with it! We developed the framework because we found that absolute measures of social return (e.g. SROI) are too hard to implement in practice, but we needed something to help us think about the marginal use of our philanthropic capital.
Over time, we would love to see a world where the “output per dollar input” of a range of activities is made transparent and comparable. We have been working with volunteer engineers at Google on the development of a portfolio data management system (PDMS), which allows us to track our own investments and their progress against key metrics internally.
In January, we completed a beta test of the PDMS (which needs a new name - any suggestions?) with about a dozen other social investors and foundations. We wanted to know whether the tool would meet their needs for tracking social, operational and financial performance… and whether we could aggregate multiple social investors who would use a common information platform and shared definitions for a handful of metrics, among other things. If so, it could allow for comparisons across the sector. The feedback has been promising and we are in the process of charting a technology development path forward to make this happen.
If the day does arrive when there is a large enough group of organizations with high quality enough data using roughly the same definitions for “jobs created” or “customers served”, we might see the day when Acumen Fund no longer needs to use the BACO to assess the social impact of one of our investments, but we can benchmark our performance against the performance of our peers.
Brian, thanks for this post. It is quite an interesting point that you make about other investors and foundations coming together to a common platform to measure value. This tells me they too are looking at better ways to measure.
So as this platform becomes available, how will an enterpreuner avail the benefits of having such a platform with which their enterprises will be measured?
Reply to PremalThe current plan is to gear the tool towards social investors, with the responsibility of entering data falling on the shoulders of the investment professionals. As we redesign the system, however, we will be consulting with a range of social entrepreneurs to see if enterprise performance tracking would be valuable. If so, the next question is whether we can develop sufficient quality control processes to ensure that having entrepreneurs and their teams enter or upload data will lead to verifiable inputs and ultimately meaningful comparisons among different companies. If that is the case, we could imagine that it would be helpful in benchmarking social enterprises, much like Guidestar has allowed for nonprofits in the US to compare their financial performance, as reported on their tax returns, with other US based nonprofits.
Brian
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