Another model of philanthropy

Ven?ture phil?an?thropy is still in its early stages in Sin?ga?pore and the buzz will con?tinue in years to come.

By ELEANOR YAP?

The con?cept of ven?ture phil?an?thropy is fairly new in Sin?ga?pore. SALT Online finds out more about this con?cept and whether it could take off here and in Asia from the Asian Ven?ture Phil?an?thropy Net?work (AVPN) CEO Simon Chadwick:

Can you explain this lat?est buzz?word ?ven?ture phil?an?thropy?? How does this dif?fer from tra?di?tional phil?an?thropy? How does this dif?fer from ?ven?ture capitalism??

Ven?ture phil?an?thropy (VP) is a?form of strate?gic phil?an?thropy that uses an investment-?minded approach in the social sec?tor, adapted from pri?vate equity and ven?ture cap?i?tal invest?ment mod?els in the pri?vate sector.?VP is a?way of select?ing and sup?port?ing big poten?tial social organ?i?sa?tions with a?mix of funds and oper?at?ing advice.?Three things dif?fer?en?ti?ate the VP approach???it is multi-?year, it is engaged and it is performance-based.?A VP prac?ti?tioner will usu?ally select and then man?age a?port?fo?lio of char?i?ties or social enter?prises, or some?times a?mix of both, and view them all as ?invest?ments? that will scale and deliver sig?nif?i?cantly increased social impact.

In ?ven?ture cap?i?tal?, the over?rid?ing suc?cess fac?tor is achiev?ing a?high finan?cial return on the cap?i?tal invested.?In VP, the over?rid?ing suc?cess fac?tor is high social value or impact.

Is this con?cept more famil?iar in the West?ern con?text rather than Asia-?Pacific? Will this dilute the char?i?ta?ble and good?will nature of the non-?profit sector?

It is more famil?iar in the West?ern con?text because ven?ture phil?an?thropy funds (includ?ing foun?da?tions apply?ing the VP method to their grant?mak?ing) have been around for more than 10?years.?Also pri?vate equity and ven?ture cap?i?tal invest?ing have been around for 40+ years and have large funds under man?age?ment and with suc?cess?ful track records.?The pub?lic equity sec?tor can sup?port VP directly with their own cap?i?tal and expe?ri?enced invest?ment professionals.

VP will not dilute the char?i?ta?ble and good?will nature of the non-?profit sec?tor if it is adapted for this cul?ture, as it has been in Europe and the US with great results. There may be VP organ?i?sa?tions that try to oper?ate in exactly the same way as they would in ven?ture cap?i?tal or pri?vate equity and they would most likely fail.

How will this new con?cept impact the world of phil?an?thropy and affect tra?di?tional philanthropy?

It will bring more pri?vate sec?tor money and tal?ent into phil?an?thropy that wouldn?t oth?er?wise have been.?Traditional phil?an?thropy may adopt the VP approach for some of their more tra?di?tional grant?mak?ing pro?grammes to improve their effec?tive?ness and demon?strate high social value.?This makes the sec?tor larger and more effec?tive as a?whole.

So what makes for effec?tive ven?ture phil?an?thropy, and how does one do effec?tive ven?ture phil?an?thropy? Is ven?ture phil?an?thropy for all kinds of phil?an?thropists, or more suit?able to par?tic?u?lar types of indi?vid?u?als? Any?tips?

Effec?tive VP needs a?dis?ci?plined approach to eval?u?at?ing the cur?rent per?for?mance and capa?bil?i?ties of the tar?get social pur?pose organ?i?sa?tion, analysing and under?stand?ing the key play?ers and trends in the social sec?tor the SPO (social pur?pose organ?i?sa?tion) oper?ates in, and deter?min?ing the risks and poten?tial increase in social impact after VP-?style funding.?This is about pick?ing win?ners from the start.?Often more than 50 or 100 oppor?tu?ni?ties will be screened out and a?small group researched in detail because the VP model is poten?tially the right one for just a?few of them.?VP is then about adding value after the fund?ing deci?sion is made.?Consulting and advi?sory ser?vice will be deliv?ered along?side the fund?ing either by the VP prac?ti?tioner or by experts on a?pro-?bono or paid-?for basis.?The VP prac?ti?tioner will often fund core costs or ?over?heads? for three to four years to build the SPOs capac?ity and enable it to grow its ser?vices much faster.?The real results???mean?ing?ful and com?par?a?tive social impact met?rics???will not be known usu?ally for two or three years.?Venture phil?an?thropists need to be actively engaged but be patient!

It usu?ally takes a?team of three to five peo?ple to oper?ate the full VP model and so indi?vid?ual ven?ture phil?an?thropists will sup?port an exist?ing team or, per?haps, cre?ate a?group of like-?minded but com?ple?men?tary organ?i?sa?tions to col?lab?o?rate and spon?sor a?new VP team or ?fund?.?The phil?an?thropist may not be vis?i?ble to the SPOs sup?ported or may choose to co-?invest along?side the VP organ?i?sa?tion that he or she is funding.?Some of the larger VP prac?ti?tion?ers in Europe are foundations.?

Your new char?ity, which got launched early this year, focuses solely on ven?ture phil?an?thropy. What can your char?ity offer to non-?profit organ?i?sa?tions in Sin?ga?pore and over?seas? Do you already have in mind some projects to ?invest??

We are a?net?work that is build?ing the VP eco-?system so there will be more VP prac?ti?tion?ers and other organ?i?sa?tions that col?lab?o?rate and work with them by pro?vid?ing funds, advi?sory ser?vices and deep social sec?tor knowledge.?The mem?bers of our net?work are the VP prac?ti?tion?ers, pri?vate equity firms, foun?da?tions, pri?vate banks, fam?ily offices, impact investors gen?er?ally, pro?fes?sional ser?vices firms, Government-?related bod?ies, uni?ver?si?ties and social sec?tor consultants.

What kind of impact do you want to cre?ate on the way phil?an?thropy is prac?ticed here in Asia? How will your organ?i?sa?tion develop this new trend in the Asia-?Pacific region?

We want to see VP become a?much more active and recog?nised seg?ment of phil?an?thropy, using best prac?tices and shared knowl?edge between coun?tries and other regions.?We will be pro?duc?ing research, hold?ing VP-?specific events and train?ing work?shops, and actively facil?i?tat?ing the for?ma?tion of new VP prac?ti?tion?ers. We are bas?ing our activ?i?ties on the suc?cess?ful model of the Euro?pean Ven?ture Phil?an?thropy Asso?ci?a?tion that was founded six years ago and now has 140 mem?bers from 20 countries.

SALT Online also checked in with Social Ven?ture Part?ners Sin?ga?pore?s (SVP) Sec?re?tary Dr Gillian Koh (and board mem?ber of the Social Enter?prise Asso?ci?a?tion) to find out the local perspective:

Can ven?ture phil?an?thropy work in Sin?ga?pore? Do you feel ven?ture phil?an?thropy is still in the early stages?

Yes, ven?ture phil?an?thropy is very much in its early stages. The steps we need to take as a?coun?try to see a?matur?ing of this space are to con?vince those who want to develop their social enter?prises to be pre?pared to seek not only grants but invite peo?ple to take equity, which will also mean that they have to be pre?pared to pro?duce fea?si?ble, real?is?tic busi?ness plans.?Another step is for social enter?prises that are already on-?going who want to scale up to prop?erly account for their finan?cial sta?tus and social impact to attract fur?ther funding.

On the giv?ing side, those with means may need to be exposed a?whole lot more to what a?social enter?prise is, and be pre?pared to develop on-?going engage?ment with the social enter?prises that they would want to fund.?The mar?ket for social enter?prises in all their diver?sity at the moment seems so small, so there is the notion that the poten?tial impact can?not be that large either to sus?tain a?rea?son?able pay-?back on investment.?

With groups advo?cat?ing the growth of ven?ture phil?an?thropy, we may need to seek out mod?els of this so that more will know what ven?ture phil?an?thropy looks like and how it works.?We will also need to develop a?lan?guage by which to describe the social, phil?an?thropic impact of the activ?i?ties that are seek?ing funding.

There are nascent efforts to develop ven?ture phil?an?thropy in Sin?ga?pore today and we are still feel?ing our way forward.

Wear?ing my other hat, I?know that the Social Enter?prise Asso?ci?a?tion has been organ?is?ing ses?sions for mem?ber social enter?prises to pitch their needs and plans to poten?tial fun?ders or ?ven?ture phil?an?thropists?, and it will take quite a?lot more of that before I?think we will any real mea?sure of deal?flow.?

Venture philanthropy is still in its early stages in Singapore and the buzz will continue in years to come.

By ELEANOR YAP?

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The concept of venture philanthropy is fairly new in Singapore. SALT Online finds out more about this concept and whether it could take off here and in Asia from the Asian Venture Philanthropy Network (AVPN) CEO Simon Chadwick:

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Can you explain this latest buzzword ?venture philanthropy?? How does this differ from traditional philanthropy? How does this differ from ?venture capitalism??

Venture philanthropy (VP) is a form of strategic philanthropy that uses an investment-minded approach in the social sector, adapted from private equity and venture capital investment models in the private sector.?VP is a way of selecting and supporting big potential social organisations with a mix of funds and operating advice.?Three things differentiate the VP approach ? it is multi-year, it is engaged and it is performance-based.?A VP practitioner will usually select and then manage a portfolio of charities or social enterprises, or sometimes a mix of both, and view them all as ?investments? that will scale and deliver significantly increased social impact.

In ?venture capital?, the overriding success factor is achieving a high financial return on the capital invested.?In VP, the overriding success factor is high social value or impact.

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Is this concept more familiar in the Western context rather than Asia-Pacific? Will this dilute the charitable and goodwill nature of the non-profit sector?

It is more familiar in the Western context because venture philanthropy funds (including foundations applying the VP method to their grantmaking) have been around for more than 10 years.?Also private equity and venture capital investing have been around for 40+ years and have large funds under management and with successful track records.?The public equity sector can support VP directly with their own capital and experienced investment professionals.

VP will not dilute the charitable and goodwill nature of the non-profit sector if it is adapted for this culture, as it has been in Europe and the US with great results. There may be VP organisations that try to operate in exactly the same way as they would in venture capital or private equity and they would most likely fail.

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How will this new concept impact the world of philanthropy and affect traditional philanthropy?

It will bring more private sector money and talent into philanthropy that wouldn?t otherwise have been.?Traditional philanthropy may adopt the VP approach for some of their more traditional grantmaking programmes to improve their effectiveness and demonstrate high social value.? This makes the sector larger and more effective as a whole.

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So what makes for effective venture philanthropy, and how does one do effective venture philanthropy? Is venture philanthropy for all kinds of philanthropists, or more suitable to particular types of individuals? Any tips?

Effective VP needs a disciplined approach to evaluating the current performance and capabilities of the target social purpose organisation, analysing and understanding the key players and trends in the social sector the SPO (social purpose organisation) operates in, and determining the risks and potential increase in social impact after VP-style funding.?This is about picking winners from the start.?Often more than 50 or 100 opportunities will be screened out and a small group researched in detail because the VP model is potentially the right one for just a few of them.?VP is then about adding value after the funding decision is made.?Consulting and advisory service will be delivered alongside the funding either by the VP practitioner or by experts on a pro-bono or paid-for basis.?The VP practitioner will often fund core costs or ?overheads? for three to four years to build the SPOs capacity and enable it to grow its services much faster.?The real results ? meaningful and comparative social impact metrics ? will not be known usually for two or three years.?Venture philanthropists need to be actively engaged but be patient!

It usually takes a team of three to five people to operate the full VP model and so individual venture philanthropists will support an existing team or, perhaps, create a group of like-minded but complementary organisations to collaborate and sponsor a new VP team or ?fund?.?The philanthropist may not be visible to the SPOs supported or may choose to co-invest alongside the VP organisation that he or she is funding.?Some of the larger VP practitioners in Europe are foundations. ??

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Your new charity, which got launched early this year, focuses solely on venture philanthropy. What can your charity offer to non-profit organisations in Singapore and overseas? Do you already have in mind some projects to ?invest??

We are a network that is building the VP eco-system so there will be more VP practitioners and other organisations that collaborate and work with them by providing funds, advisory services and deep social sector knowledge.?The members of our network are the VP practitioners, private equity firms, foundations, private banks, family offices, impact investors generally, professional services firms, Government-related bodies, universities and social sector consultants.

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What kind of impact do you want to create on the way philanthropy is practiced here in Asia? How will your organisation develop this new trend in the Asia-Pacific region?

We want to see VP become a much more active and recognised segment of philanthropy, using best practices and shared knowledge between countries and other regions.?We will be producing research, holding VP-specific events and training workshops, and actively facilitating the formation of new VP practitioners. We are basing our activities on the successful model of the European Venture Philanthropy Association that was founded six years ago and now has 140 members from 20 countries.

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SALT Online also checked in with Social Venture Partners Singapore?s (SVP) Secretary Dr Gillian Koh (and board member of the Social Enterprise Association) to find out the local perspective:

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Can venture philanthropy work in Singapore? Do you feel venture philanthropy is still in the early stages?

Yes, venture philanthropy is very much in its early stages. The steps we need to take as a country to see a maturing of this space are to convince those who want to develop their social enterprises to be prepared to seek not only grants but invite people to take equity, which will also mean that they have to be prepared to produce feasible, realistic business plans.?Another step is for social enterprises that are already on-going who want to scale up to properly account for their financial status and social impact to attract further funding.

On the giving side, those with means may need to be exposed a whole lot more to what a social enterprise is, and be prepared to develop on-going engagement with the social enterprises that they would want to fund.?The market for social enterprises in all their diversity at the moment seems so small, so there is the notion that the potential impact cannot be that large either to sustain a reasonable pay-back on investment.?

With groups advocating the growth of venture philanthropy, we may need to seek out models of this so that more will know what venture philanthropy looks like and how it works.?We will also need to develop a language by which to describe the social, philanthropic impact of the activities that are seeking funding.

There are nascent efforts to develop venture philanthropy in Singapore today and we are still feeling our way forward.

Wearing my other hat, I know that the Social Enterprise Association has been organising sessions for member social enterprises to pitch their needs and plans to potential funders or ?venture philanthropists?, and it will take quite a lot more of that before I think we will any real measure of deal flow.?

Source: http://www.salt.org.sg/1465/another-model-of-philanthropy/

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