Question: My name is Susan Merkott. I'm from MIT. My question is to Yasmina. Greetings, Yasmina. I am interested in learning a few more details about your one and a half million dollar investment. Your India Company sold two hundred and fifty thousand units. I'm wondering if the company is profitable at this point, if it's breaking even? It's been in existence for how many years? You know that we go back and forth on this in conversations together.

Absolutely. It's good to see you, Susan. So, I unfortunately don't have all the latest details on the financial metrics, although with almost all the companies we invest in, they do provide us with quarterly updates, which is one of the benefits of being an investor. They have some sort of accountability to us in that regard. I know that the for-profit company's only been around for about a year and a half, and they had the great advantage of being kind-of built on the platform of a non-profit that have already spent around seven years developing a market, presenting this product in the marketplace. But I know that they have been growing quickly. So I would guess that they're probably not profitable right now, but that their growth is leading them towards becoming profitable in the next three or four years.

And in terms of Acumen's investment, how does it work with Acumen getting a return on that investment?

Oh, so the way it works is, we invest both debt and equity, in different -- you know, depending on the right kind of capital. So when we invest debt, we do charge interest. It's typically far below what a commercial bank in that sector would charge, because they have a big risk premium that they add on to start-up businesses or businesses that serve the poor. Or they can't get capital from banks at all. But in any case, we sort of structure the debt so that it's allowing the company to grow, and it doesn't create an excessive burden on them as they are going through their first few years of growth.

So what's the interest rate then, on that debt, do you know?

I don't know the exact interest rate, and we don't usually publicize it because then everyone who hears an interest rate is like, well that'll be my interest rate. And it does vary depending on --

Say how does it compare to, say, microfinance interest rates?

Oh much lower.

Much lower.

Much lower, because the transaction costs for microfinance are so high, that their rates tend to be up around twenty percent. And ours are going to be closer to the local cost of capital, which would be like a prime interest rate, which would be for a well-established company, which, again, these start-ups don't usually have access to. So, there... you know, it's slightly below what the market would charge, but it's something that you would see in the market, so maybe, again depending on the economy that we're talking about, somewhere between seven to ten percent.

But then, do these start-up companies have the capacity to set up these loan arrangements with you? And are they doing that internationally? Are you sending people back and forth to India or --

Well, we have offices in all the countries that we invest, because we've just found that it's a much more effective way to find investment opportunities, and then to provide the ongoing management support. We also really need to focus on what are the... you know, investing cross-border is not a simple thing to do, so we need to really understand the local legal context. There's a million reasons why our approach itself is not designed to be profitable, because the transaction costs, again, would scare away any investor that's really trying to make money. So that's sort-of the way we look at debt, is trying to structure it so that it really helps the company grow, and also allows them to graduate to getting debt from other local sources down the road. So again, if we charge a zero interest loan, it's harder for them to make the case that they could manage a more commercial loan. But after working with us for a few years, they're often in a great position to then go to a local bank and say, we have a track record. In the case of equity, we don't have the same kinds of thresholds that a lot of typical equity investors would have, where they want to see a pretty quick turnaround and really large return on investment. We have a longer-term horizon, we're hoping to get all of our capital back. If there is some sort of, you know, upside on our equity investments, all of that goes back into our fund. And we hope that any upside that we do see would offset what we expect from the overall portfolios that we won't see a huge upside, because of the transaction costs. So again, we're in a weird space, because if you look at the investment by itself, it looks a little bit commercial, but if you look at the way we work and who we invest in, this is just not a market that is attractive to investors right now. So that's where our costs come in, in terms of management support, finding these entrepreneurs, working with them. Even structuring the relationship between ID India [?] and Tardeep [?] was a two-year process, and something that we saw having a huge potential social impact, but we'll never recover the cost of spending two years to figure out how to do this technology transfer, and that's not really what motivates us.

And do you have social indicators as well as financial indicators that you're tracking your progress with?

Yeah, absolutely. I mean, I think what's nice about our model is that the social impact is positively correlated with the financial impact. So, because these companies are serving the poor directly, they don't take a portion of their profits and donate it to a good cause. Basically, their products are delivered to this income segment, so as they grow, we look at who are their customers, what is their income level. What we don't necessarily do is have the resources to do a long-term evaluation of the social impact of each of these beneficiaries, because those studies take a lot more resources than we have. But it is basically why we make the investment, so we do track it carefully over time. And you and I should catch up and keep talking about this, because we've struggled with these same issues not only in agriculture but also in safe drinking water and sanitation.