Merging the soul of philanthropy with the spirit of venturing

All across the world, philanthropy plays an increasing role in addressing social challenges, and the tools available to philanthropists have never been so diverse.



Pieter Oostlander

Pieter Oostlander

Pieter Oostlander is the chairman of the European Venture Philanthropy Association (EVPA) and the founding partner of Shærpa, a non-for-profit organisation structured as a social interest organisation. His professional background is in accountancy and finance. In that field, he held various top-level finance functions.Pieter Oostlander is the chairman of the European Venture Philanthropy Association (EVPA) and the founding partner of Shærpa, a non-for-profit organisation structured as a social interest organisation. His professional background is in accountancy and finance. In that field, he held various top-level finance functions.
Pieter Oostlander

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Introduction from Executive Producer JO DAVIS
This piece from Pieter Oostlander, chairman of the European Venture Philanthropy Association (EVPA) looks at a new approach to philanthropy called venture philanthropy. The Leasing Foundation is interested in this kind of approach because it is a way that the we can have a greater impact on bigger social problems. Given the influence and reach of our Governors and Fellows, and the financial power and human capacity of their organisations, we are in a unique position to play a number of structural roles: as connector – of people, ideas, causes and innovative conceptions of giving; of conduit – helping donations, charitable or philanthropic – flow between donors and causes; and of compounder – helping people and organisations amplify the results of their giving through supporting the giving process; and as catalyst – using unique expertise and access to create new opportunities. We want to capture the industry’s already highly positive attitude toward giving, but shift it away from the view that giving is small amounts of money given by individuals – often to same organizations year after year – towards a view of giving that is fundamentally part of the fabric of doing business and extends to more than direct financial contributions. Venture philanthropy – of which the best example of this approach is DotOrg, Google’s $1 billion philanthropic fund – is characterised by high engagement from those supporting a cause, financing that is tailored to a specific project or cause, support that is sustained over time, the involvement of networks of people and organisations that offer more than financial support.

Who should be interested in this?
CSR professionals in large corporates who are already engaged in philanthropic activities, and those in smaller organisations who want to understand where the future of philanthropy is heading.

 

Merging the soul of philanthropy with the spirit of venturing

 

What is Venture Philanthropy?

All across the world, philanthropy plays an increasing role in addressing social challenges, and the tools available to philanthropists have never been so diverse.

One of the new approaches to philanthropic giving is ‘venture philanthropy'.  Venture philanthropy works to build stronger ‘social purpose organizations'  by providing them with both financial and non-financial support in order to increase their societal impact. We’re combining the “soul” of philanthropy with best practice from venture capital.

Venture philanthropy works to build stronger 'social purpose organizations'  by providing them with both financial and non-financial support in order to increase their societal impact.

Venture philanthropy works to build stronger ‘social purpose organizations' by providing them with both financial and non-financial support in order to increase their societal impact.

In Europe the VP approach uses the entire range of financing instruments (grant, debt, equity etc.), with grant-makers more often using the term “venture philanthropist”, and equity and debt investors the term “social investor”, but both groups pay particular attention to the ultimate objective of achieving societal impact.

Venture philanthropists and social investors sharing seven characteristics:

  • High engagement: hands-on relationships with SPO management
  • Organisational capacity-building: building the operational capacity of portfolio organisations by funding the core operating costs rather than individual projects
  • Tailored financing: using a range of financing mechanisms tailored to the needs of the supported organisation
  • Non-financial support: providing value-added services to strengthen management
  • Involvement of networks: enabling access to networks that provide skill-sets and resources to the investees
  • Multiyear support: supporting a limited number of organisations for 3-5 years, then exiting when organisations are financially or operationally sustainable
  • Performance measurement: placing emphasis on good business planning, measurable social outcomes, achievement of milestones and financial accountability and transparency.

Based on EVPA's survey of practitioners in Europe there are three additional dimensions that distinguish venture philanthropy from other approaches:

(i) VPOs take risks by supporting early stage, small organisations with little track record

87% of respondents to the EVPA survey support organisations that are less than 5 years old. As the Monitor Report of 2012 highlighted, “philanthropic support can play a catalytic role in ways that investor capital cannot”. This is particularly the case in the start up, proof of concept and expansion stages of an SPO’s development, where start-up losses are incurred and the risks are perceived too large to be acceptable for impact and traditional investors.

(ii) VPOs support a range of organisational types from NGOs to social enterprises

The results of the EVPA survey show 39% of VPOs supporting impact first social enterprises, while 45% support NGOs either with or without revenues from some form of trading. LGT Venture Philanthropy, for example, supports via an equity investment, B2R Technologies, a business process outsourcing company based in rural North India, providing opportunities to local youth who would otherwise have to migrate to big cities for employment. At the same time they also support, via a grant, Mothers2Mothers in Africa, which provides support to HIV-positive pregnant women to deliver health babies.

(iii) VPOs have a wide range of return expectations

VPOs target a wide range of financial returns, with a relatively even distribution between those expecting a positive return (60% of this category expecting 5% or less), those expecting capital to be repaid and those expecting a negative return.

 

Grant-making, social investment and venture philanthropy and their drivers.

Grant-making, social investment and venture philanthropy and their drivers.

 

What unites VPOs is their focus on impact and, as a natural next step, the importance assigned to impact measurement. 90% of EVPA survey respondents measure impact on at least an annual basis and EVPA’s Practical Guide to Measuring & Managing Impact offers a hands-on and practical guide to help even more organisations in impact measurement.

Conclusion

VPOs in Europe are a “broad church” containing groups working with different types of organisations and with different return expectations. However they are united through their shared focus on impact above all else. Recent research by EVPA also highlighted how increasingly VPOs are working on ecosystem development and engaging with other parties (government, private sector etc.) to ensure systemic change, an approach that only makes sense with an “impact centric” focus.

About the EVPA

EVPA (European Venture Philanthropy Association) works to promote the development of venture philanthropy in Europe. It offers a forum where more than 150 actors involved in this sector are able to interact and learn from each other as well as leading the way in providing professional training workshops and research in venture philanthropy best practices.

 

CC BY 4.0 Merging the soul of philanthropy with the spirit of venturing by Pieter Oostlander is licensed under a Creative Commons Attribution 4.0 International License.