Roberts, Jennifer, Stanford Social Innovation Review
Venture philanthropists and social investors have long struggled to measure the true impact of the organizations they fund.
But a new Web-based evaluation tool, the Portfolio Data Management System (PDMS), promises to allow donors and investors to track their investments' performance and let them, along with the social enterprises they fund, compare their data to those of organizations doing similar work. Salesforce.com, which granted 5,000 nonprofits free licenses to access its customer relationship management software platform, is working with Acumen Fund to rebuild the software and aims to make it available on that platform in January.
Brian Trelstad, Acumen Fund's chief investment officer, began developing the system after he joined the social investment fund four years ago. "We were tracking different metrics month by month on various spreadsheets, so it was hard to know what was happening in the portfolio," Trelstad remembers. "We were giving stars and everything was a four out of five-like in Lake Wobegon, all the children were above average. And any comparison of our investments across the sector was based on thin slivers of public information we got from our peers, little of which was quantifiable or verifiable."
With financial support from the W.K. Kellogg Foundation and Cisco Systems, Trelstad and his team searched for existing software that could help them compare their investments' performance over time, against their projections, and compared to a relevant peer group. But nothing had the capacity to track the operational, social, and financial data they were collecting from their enterprises.
"On the venture capital side, most software tools focus on the financial metrics, and the grantmaking tools don't let you look at that many quantitative metrics." They then decided to ask Google, a donor to Acumen Fund, for help. (Google engineers can devote 20 percent of their work hours to any projects they like.) After four Google engineers spent 18 months working with Marc Manara, an Acumen portfolio associate and recent computer science graduate, Acumen had a software tool it hoped would manage and track its portfolio's performance.
To use the software, a portfolio manager logs in and creates a new investment record. Together with the management team of the business, he or she then identifies 10 to 15 financial, operational, social, and environmental metrics that are important to running the organization and that demonstrate social or environmental impact. Portfolio managers are also encouraged to select a few common metrics (say, revenue growth or jobs created) that enable across-portfolio comparisons. …