Frequently Asked Questions
1. What is Venture Philanthropy trying to achieve?
2. Is venture philanthropy the same as venture capital?
3. Do venture philanthropists expect to get their money back or make a profit?
4. Isn’t venture philanthropy what grant making foundations do anyway?
5. What are the key steps in making a venture philanthropy investment?
6. What kind of social purpose organisations are venture philanthropists looking for?
7. Are these investments open ended or do venture philanthropists have an ‘exit’ in mind?
8. Is it possible to measure a ‘social return’ on investment?
9. Do venture philanthropists sit on the boards of non-profits they support?
10. How do venture philanthropists decide what advice and support a charity needs?
11. Does venture philanthropy always result in a successful outcome?
12. Are there ways a grant making foundation can get involved in venture philanthropy?
13. How can professionals from venture capital/private equity get involved?
14. How does EVPA help promote venture philanthropy?
1. What is Venture Philanthropy trying to achieve?
Venture philanthropy (VP) aims to earn you the highest impact from your charitable investment; but instead of a financial return you are trying to achieve the highest benefit to society. Success in venture philanthropy means achieving a social impact by investing time and money in charities and social enterprises.
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2. Is venture philanthropy the same as venture capital?
Some of the processes and methods of venture capital are similar to VP, but are not a carbon copy. Charities or social enterprises are not privately owned so any surpluses or profits they make are used for public benefit or put back into the organisation. Primary focus in VP is on creating social not financial value.
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3. Do venture philanthropists expect to get their money back or make a profit?
Most VP’s use non-returnable grants when financing a charity. Some use loans at market or below market interest rates, which may include options to share in any surpluses generated by the charity. Some VP invest in equity in a social business, and like a commercial investment, the value of which may increase or decrease over time.
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4. Isn’t venture philanthropy what grant making foundations do anyway?
Many foundations are excellent strategic funders but usually work with so many charity’s that they cannot become highly engaged with any of them. They prefer an arm’s length relationship not a highly engaged one. Many Foundations help provide resources to strengthen the operational capacity of charities, but most usually provide finance for the services of a charity (so that beneficiaries do not have to pay directly). VP focuses more on building up the operating capacity and scale of impact.
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5. What are the key steps in making a venture philanthropy investment?
Generating and screening a flow of potential investments. Due diligence (evaluation of mission, people, plans and potential; assessment of risk). Funding and strategic plans agreed
Co-funding opportunities with others. Agree advisory services to be provided to the charity. Implement and monitor; suggest mid-course corrections. Planning for and implementing a successful exit.
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6. What kind of social purpose organisations are venture philanthropists looking for?
Entrepreneurial style. Strong and effective leadership – both executive and board. Open to VP involvement, not just funding. Having organisational areas which need strengthening, and which VP has skills to address. Strong focus on outcome and impact. Usually at inflexion points e.g. rapid growth, new services, mergers or collaborations.
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7. Are these investments open ended or do venture philanthropists have an ‘exit’ in mind?
VP investments usually aim to take an charity to a new level of scale or efficiency, leading to increased social impact. VP’s usually limit their involvement to this development period, which may be 3 – 5 years. Exit is possible when an charity has developed its programmes significantly and attained a better level of financial sustainability (increased revenue from fee for services or donor grants); VP’s help organisations reach sustainability before exiting.
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8. Is it possible to measure a ‘social return’ on investment?
This is more difficult than measuring a purely financial return. Some kinds of social value can be monetised directly but most cannot e.g. a project which creates sustainable jobs can measure its impact in terms of costs of unemployment and new income; whereas a project providing counselling for bereaved parents would find it more difficult to measure its value in purely financial terms. VPs, researchers, foundations etc are working on simple metrics which help an investor determine the short and long term benefits to society that are being created. One of EVPA’s working groups is focused on performance measurement and social impact.
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9. Do venture philanthropists sit on the boards of non-profits they support?
Some do, but others prefer not to. All VP’s have access to board level information and work closely with senior executives and board members at strategic and operational levels.
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10. How do venture philanthropists decide what advice and support a charity needs?
During due diligence VP’s assess the strengths and weaknesses of the non-profit to achieve major growth and development. This may involve a variety of assessment tools used to agree a package of support and advisory services. Common areas include a mix of strategy, marketing, IT, communications, human resources, financial planning, coaching, governance strengthening.
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11. Does venture philanthropy always result in a successful outcome?
Just like any financial investment, the results of VP show a high degree of variability – from outstanding success to failure. Understanding the reasons for success or failure, and applying lessons learned, is important to venture philanthropists.
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12. Are there ways a grant making foundation can get involved in venture philanthropy?
Help fund start up of new VP organisations. Be a source of qualified ‘deal flow’ and sector intelligence. Co-invest with VPs. Offer long term funding to successful charity’s after a VP exits.
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13. How can professionals from venture capital/private equity get involved?
Become active donors to existing VP funds. Start up new VP operations. Provide staff time to work with VP portfolio charity’s. Co-invest in individual VP-backed organisations.
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14. How does EVPA help promote venture philanthropy?
Providing a unique networking platform to share good practices across Europe. Organising pan-European and country level conferences and seminars. Acts as a bridge between venture philanthropists, foundations and the private equity community. Adding to knowledge and understanding through research and working groups. Publishing an annual directory of European venture philanthropy activity. Providing information and technical support to newly establishing VP funds.
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