Acumen Fund and Embrace, From the Leading Edge of Social Venture Investing

Acumen Fund and Embrace, From the Leading Edge of Social Venture Investing

By
Lyn Denend, William Meehan III
2011|Case No.SM191

Jane Chen (GSB 08) and Brian Trelstad (GSB 99) had known one another for years. Trelstad, the chief investment officer of the nonprofit global venture fund Acumen Fund, had been a mentor to Chen and her colleagues as they worked to develop a low cost infant warmer to meet the needs of low birth-weight babies, their mothers, and healthcare providers in developing countries. Chen, who became the chief executive officer of Embrace Global, the nonprofit founded to achieve this objective, had come to value Trelstad’s guidance and trust his advice. In late 2010, as she and her team were on the cusp getting their innovative new product to market, Chen and Trelstad’s relationship took on a new dimension. Embrace was seeking an infusion of funds to support its product launch and help the company rapidly achieve scale. In parallel, Acumen Fund was continuing to look for organizations with game-changing products and services in need of patient capital on their way to becoming self-sustaining businesses that effectively serve the poor. Suddenly, Trelstad was a potential investor and Chen was a prospective investee. As they explored the possibilities of a financial partnership, one of the key questions facing Embrace was whether or not it should consider adopting a for-profit or hybrid organization structure so it could raise more substantial funding by taking on equity investors. Acumen Fund had to think about whether or not it was interested in investing in Embrace, how to value the company, and how large a stake it might be willing to take if a deal moved forward. This case explores the situation from the perspective of both organization and can be used to support a high level negotiation between the two parties.

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