Dear Aroon,

The past two weeks have brought renewed fears and renewed hopes. Fear: terrorism in London, a tragic day after the city’s joyful Olympics celebration. To those of you in London and throughout England, we send our sympathies. Hope: Tony Blair’s victory in leading the G8 to increase aid to Africa by $50 billion and decrease African debt by $40 billion.

To us at Acumen Fund, the hope of this past week outweighs the fear. That hope, however, requires that the promises of the G8, the promise to “Make Poverty History,” be realized. Tony Blair, Jeffrey Sachs, Bono and others deserve congratulations for putting poverty on the global agenda and making the world believe that we actually can do something about it. That’s a big deal, a good Chapter One. Now, on to Chapter Two: Execution, the how-to chapter. It is a more complex part of the story, but a critical one.

Effective execution to reduce poverty must start with investment, build on existing entrepreneurship and determine how best to deliver affordable, critical goods and services to the poor in ways that are financially sustainable and scalable. One good sign from the G8 was the UK’s $100 million commitment to establish an African entrepreneurship fund through the Shell Foundation. We need to see more such funds that give local entrepreneurs a chance to build companies and create jobs so that people ultimately can make their own decisions and solve their own problems. We are also increasingly interested in searching for opportunities that link the innovations of larger corporations to the community-based and often large-scale distribution systems of some of the best non-governmental organizations.

In the past quarter, our investments continued to grow and to teach us new lessons. Sometimes the most important lessons are the simplest and seemingly most obvious. I visited the A to Z factory and found myself again with a man I’d met a year ago who’d been given a bednet as part of the company’s initial outreach program. He makes about six dollars a month and lives in a tiny mud-and-stick hut. When I first met him, he’d been living with malaria in his bloodstream almost 100% of the time; he was, not surprisingly, a slight man with a bony back covered by an old shirt. He spoke not a word of English and spent time tending a ragtag garden consisting of a few stalks of maize and not much else.

This year, he was a different person entirely. I found myself patting his solid back when I greeted him and laughing when he said, “Pleased to see you” in English. He then showed me his garden, now lush with high stalks of maize growing among beautiful gladiolas and fat green squash. I couldn’t believe the transformation and asked him in Swahili what had happened and whether someone had given him some money or a job. “I have worked hard and am happy,” he answered in English. The truth was the changes happened because for the first time in his life, he spent a year without being sick. Health matters in countless ways, and good health leads to higher levels of human productivity. We know this is true in principle, but such a stark change in an individual during a single year serves as a powerful example that should not be forgotten. Our job is to determine how to make critical technologies, medicines and care affordable and available to him — and, ultimately, to all people.

This is where we must start if we are truly to “Make Poverty History.” We realize that long-term solutions will not happen overnight, and our job is an enormous one. But we remain convinced that poor individuals around the world do not want hand-outs; they want to create a better life for themselves and for their families by making important decisions and choices. We want to find ways to make those choices possible by building financially sustainable and scalable organizations and businesses.

As we develop even greater expertise in our work, we have been refining the focus of our three portfolios. As a result, we will officially be changing their names to Health, Housing and Water as of August 1, in order to describe each one more accurately.

Following is a brief update of our recent activities.

In June, Acumen Fund Chief Investment Officer David Kyle and Portfolio Manager Denise Ciesielka went to India to meet with potential investees and continue building the Health Portfolio pipeline. The most promising opportunities include a 70,000-outlet retail healthcare distribution network that is seeking to become financially sustainable, as well as various enterprises in the nascent health insurance industry, which is starting to take form in both a for-profit and non-profit model. Building on Denise and David’s work, Summer Associate Manisha Shetty will be investigating the landscape of health insurance in India and identifying potential investments. Manisha will also be working on business plans and sustainability models.

One of Acumen Fund’s first investments, in the Sustainable Sciences Institute’s (SSI) ImmunoSensor project, will be completed in August. With our financial and management support, SSI has overcome many technical challenges and is now validating the technology in the laboratory. In addition, the development agreement negotiated with the University of California — with Acumen Fund’s advice and assistance — has set a precedent for ensuring that developing world populations have the greatest possible access to intellectual property developed at the University.

Acumen Fund continues to work with Voxiva and expects to close the investment, which has already been approved, by the end of August. Voxiva’s innovative solutions have been sought out by organizations worldwide, including those working in communication efforts associated with the tsunami.

• Long-Lasting Insecticide-Treated Nets (LLITNs) – Improved anti-malaria bednets
  
  Since our initial investment in 2002, A to Z Textile Mills has increased its manufacturing capacity to more than 1.5 million Olyset nets per year. Acumen Fund is engaged in ongoing discussions with A to Z about developing a private market for the Olyset nets and curtains using a variety of innovative approaches — including employee, corporate, microfinance and retail channels.

• Rural Franchise Drug Distribution – Delivering affordable generic drugs and critical goods
  
  The Sustainable Health Enterprises Foundation (SHEF) has made significant progress this year. SHEF’s focus on marketing and sales campaigns and on standardizing their processes resulted in impressive figures: at the end of May, they had exceeded their goals in both sales (108% of forecast) and patient visits (225% of forecast). With standardization in place and revenues reaching targets at the store level, SHEF is now looking at additional sites. Acumen Fund collaborated with SHEF to establish key criteria for expansion, and will continue to work with them to identify potential sites based on these criteria.

• Telemedicine for Eyecare – A telemedicine network connecting eye hospitals in India
  
  Denise Ciesielka visited Aravind Eye Hospital in Madurai in July to review the work of the telemedicine program, which connects five Aravind hospitals. This network allows for difficult cases to be reviewed from referring hospitals and prevents unnecessary travel for the poor from remote areas. Aravind plans to roll this program out to 20 hospitals this year, with a goal of ultimately expanding to 100 hospitals. Other organizations have expressed interest in Aravind’s unique software — developed with Acumen funding — which allows for real-time interaction as well as capturing and sending clinical information for later review.

• Home Healthcare – Training and employment in Egypt
  
  Care With Love has formalized its first franchise in Alexandria. Training of employees and the establishment of operational processes is currently underway. The franchise will be in operation before the end of the year and we hope that it will serve as the foundation for a model that can be extended throughout Egypt.

Acumen Fund has identified final candidates for the Housing Portfolio Manager position and will be making a decision shortly. We continue to move forward with our investment in a mortgage guarantee facility for the poor in Pakistan. The Overseas Private Investment Corporation (OPIC) provided a commitment letter and a proposed term sheet to Acumen Fund in late June. The terms are now under consideration by the National Bank of Pakistan (NBP). Due to the time involved in obtaining the requisite approvals from OPIC, the anticipated launch date for this program has been delayed until Fall 2005.

• Smallholder Organic Farm Supply Network — A for-profit organics business in Egypt
  
  Once the new Housing Portfolio Manager has been hired, we intend to resume our efforts to initiate a joint venture between Sekem and a venture capital-backed organic foods marketing label in the U.S.

• Housing for Urban Squatters — Low-cost housing ownership for squatters in Pakistan
  
  Saiban is in final negotiations to purchase land in Lahore. This housing settlement would be a new model for Saiban as the land is privately owned instead of being obtained from the government. The success of the settlement in Lahore will determine the speed of scaling up a model for private land. In addition, the government has approved a tract of land in Islamabad to be provided to Saiban at a subsidized price.

• Micro-lending for Women — A micro-finance institution in Pakistan
  
  Kashf has initiated a study to investigate the market potential for a home improvement loan product. Acumen Fund is supporting a Fellow hired by Kashf to undertake the study over the next nine months. The effort will entail assessing the market demand and designing an appropriate product should there be a market demand.

• High-end Furniture Making – Training and employment in Egypt
  
  The construction of the new manufacturing facility will be completed in the next month. New machines have arrived and are being installed now. Nadim has already hired 63 women and has developed a rigorous training process for the new employees. The company has designed a formal orientation and awareness-raising program to ensure a smooth integration of the women into the factory workforce.

During a visit to India in June, Portfolio Manager Yasmina Zaidman identified a number of promising potential investments that focus on bringing simple but effective water treatment technologies to low-income rural and urban communities, both at the household level and through larger community-scale treatment technologies. Creative partnerships among innovators from India and abroad, local manufacturers and distribution partners in the NGO world are showing a path towards sustainable business models that can reach remote rural areas and slums. Summer Associate Radhika Piramal will be working with Yasmina on due diligence for several potential investments in India addressing arsenic contamination and biological contamination of water supplies.

In addition to managing our three current investments, Yasmina has been working with Citibank in New York and India to provide a Letter of Credit for financing urban water infrastructure in Hyderabad through Tulasi. Tulasi is a for-profit company that was launched by Dr. Reddy’s Foundation in Hyderabad to develop creative financing models for urban slums. This has been approved as the fourth investment in the Water portfolio.

• Low-Cost Drip Irrigation — An innovative and affordable design for farmers in India
  
  During Q2, International Development Enterprises (India) and its new for-profit sales arm, Global Easy Water Products (GEWP), sold low-cost drip irrigation systems to small-scale farmers at their highest rate to date, with 1715 farmers buying systems that will cover 2257 acres (in comparison, during this same period last year, 532 systems were sold). These numbers can be attributed both to an expanded network of dealers recruited and trained by IDE India, and to it being the high season for sale of irrigation products before the summer monsoon. GEWP is focused exclusively on sales and distribution of drip systems, and has begun to explore export markets for the systems in Africa and Latin America. The announcement of significant government subsidies for drip irrigation in India has dampened likely demand for domestic sales growth in the coming two to three years, making exports an even higher priority. IDE was profiled in the June 20 issue of Forbes, in an article entitled "Trickle-up Economics."

• Fluoride Removal Filter — A local enterprise to produce and distribute filters in India
  
  Mytry De-Fluoridation Filter Technologies has developed a household filter to protect Indians in areas with toxic levels of fluoride in groundwater from a preventable and crippling disease called fluorosis. They are currently focusing their efforts on partnerships with state governments and charitable organizations that are providing filters to families living below the poverty line. To date, they have produced and sold more than 15,000 filters, benefiting roughly 75,000 individuals.

• Safe and Affordable Drinking Water — A global franchise model to make drinking water available to the poor
  
  WaterHealth International (WHI) has almost completed construction on its second pilot water treatment facility in Andhra Pradesh, and with the help of Acumen Fund Fellow Ankur Shah, has developed a new design that will expedite construction. WHI has also increased its local capacity by hiring a project manager for India, and a consultant who will develop and implement its growth plan. In response to the tsunami in Sri Lanka, WHI has launched a special program to participate in rebuilding efforts with support from Acumen Fund, the United States Trade and Development Agency (USTDA), Global Giving and a number of individual donors. To date, they have identified 35 sites for community water treatment systems, have shipped ten systems for installation, and have one system up and running providing clean water to workers at the site of a new village for displaced families called “ Restoration Village.” WHI expects the 35 systems — which will have the capacity to provide clean water to as many as 50,000 people — to be installed by the end of Q3.

In May, the Acumen Fund Advisory Council met at the offices of Fortress Investment Group. The Council discussed portfolio performance, metrics and financial sustainability. A major focus was the need to support the management of many social enterprises with significant resources. Indeed, we are considering hiring COO-equivalents to work directly with some of our investments to strengthen their management systems and planning skills.

A group of graduating students from the Convent of the Sacred Heart School in New York City spent part of their senior year raising money to help a village in India by supporting Acumen Fund. To date, they have contributed $13,000 to our Water portfolio and intend to pass this program on to the next class of graduating students. We are grateful to, and inspired by, these young women.

When we look at all the hope inspired by the Live8 concerts, and people ask what happens now, we should point to these kinds of examples of young people finding specific, tangible ways to change in the world.

Hope and fear. I am writing this letter from Oxford, England at the TED Global conference, an extraordinary gathering of leaders in technology, entertainment and design from around the world. Only a week has passed since the terrorist bombings in London, and yet the British are “getting on,” as the British are famous for doing. They are not being stopped by fear, nor should they be, nor should we be.

You cannot be here without being reminded of how connected our world is, and how each one of us must be responsible for engaging in it. What strikes me is that by committing ourselves to eliminating poverty, not only will those we serve be changed, but so will each of us. To do so, in addition to focusing on development issues like technology and business models, we must also have the moral imagination to understand “otherness” and, ultimately, to build greater understanding so that we can create real, long-term solutions. This message of engagement has resonated strongly here, and was even highlighted in a BBC News article on TED Global.

The question is not what we should do, but what we can help others to do for themselves. This is at the center of dignity and the heart of our philosophy.

The first step is to imagine what is possible — and again we are grateful to a handful of leaders who have brought the notion of solving global poverty to the forefront of the world community. We urge you to get involved. Please visit our website or let us know if you have questions. And please help us to grow the community of people committed to solving the problems of global poverty by forwarding this update to a friend.

Regards,

Jacqueline Novogratz