Venture Philanthropy in Europe

EVPA The EVPA is a membership organisation aimed at organisations and individuals who either are practicing venture philanthropy, are interested in learning more about it or becoming more actively involved with it. The EVPA provides a forum for networking with others in order to achieve common objectives. The EVPA was formally incorporated in January 2004 and was registered as a UK Charity with the pro bono help of law firm S. J. Berwin. The Board of Directors of the EVPA is comprised currently of its founding members, all of whom are associated with the European Venture Capital sector. Our mission is to increase philanthropic giving throughout Europe by: • Supporting our members in their venture philanthropic activities; • Promoting the expansion of venture philanthropy throughout Europe. To achieve this, the EVPA: • Provides a forum within which European based venture philanthropists can network, exchange ideas and debate best practice; • Informs potential donors and others of the role and benefits of venture philanthropy and facilitating its development, with the aim of increasing knowledge and acceptance of the benefits of venture philanthropy in the charitable sector; • Facilitates and promotes new venture philanthropic efforts; • Seeks to increase the effectiveness of venture philanthropy. Venture philanthropy is a field of philanthropic activity where private equity / venture capital models are applied in the non-profit and charitable sectors. There are many different forms of venture philanthropy but the EVPA believes it can be characterised as: • The active partnership, or engagement, of donors, volunteers and/or experts with charities to achieve agreed outcomes such as organisational effectiveness, capacity building or other important change; • The use of a variety of financing techniques in addition to grants, such as multi-year financing, loans or other financial instruments most appropriate for a charity's needs; • The capability to provide skills and/or hands-on resources with the objective of adding value to the development of a charity; • The desire to enable donors to maximise the social return on their investment whether that be as a financial donor or as a volunteer of time and expertise.

Acknowledgements In conducting this research and writing report I would like to thank all those who were so generous with their time and thoughts during interviews, e-mail exchanges, telephone conversations and occasional chats. Special acknowledgement is due to Doug Miller, without whose vision, energy and commitment neither this report, nor the EVPA itself, would have been possible. Thanks to Gloriana Guillen, who provided me with invaluable assistance during the early stage of the research. And finally, I would like to thank those people who read and commented on earlier drafts of the report, in particular Rob John, David Carrington, Peter Scholten, Pascal Vinarnic, John Pepin, and Sioban Daly.

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CONTENTS Executive Summary .............................................................................................4 1. Introduction .................................................................................................................... 9 Purpose and goals of this study ........................................................................................ 9 Rationale and approach .................................................................................................... 9 The organisation of this report ....................................................................................... 10 PART ONE: SETTING THE SCENE ................................................................... 11 2. The nonprofit sector and philanthropy in Europe .................................................... 11 Historical and cultural specificity of the nonprofit sectors ............................................ 11 Growth, change and development paths......................................................................... 13 Role of philanthropy and philanthropic foundations...................................................... 15 3. Venture philanthropy................................................................................................... 19 Definitions and concepts ................................................................................................ 19 Significance .................................................................................................................... 20 Critiques and debates...................................................................................................... 21 Examples ........................................................................................................................ 22 Promise and potential ..................................................................................................... 25 PART TWO: VENTURE PHILANTHROPY IN EUROPE..................................... 28 4. Forms of venture philanthropy in Europe ................................................................. 28 Founders and funders ..................................................................................................... 29 Main organisational forms.............................................................................................. 31 Purpose and goals ........................................................................................................... 32 Levels and forms of financial support ............................................................................ 33 Levels and forms of engagement.................................................................................... 34 Monitoring, performance, impact, and exit .................................................................... 36 5. Obstacles and opportunities ........................................................................................ 44 Locating the European version of venture philanthropy ................................................ 44 Obstacles and limits........................................................................................................ 45 Opportunities and potential ............................................................................................ 47 6. Conclusions ................................................................................................................... 49 Bibliography and suggestions for further information................................................. 50 Appendices ........................................................................................................................ 53 A. Research brief, methods and process......................................................................... 53 B. List of those interviewed and consulted .................................................................... 56

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Executive Summary 1. Purpose of this report 1.1

To provide an accessible overview of the development, the levels of activity and the emerging forms of venture philanthropy in Europe;

1.2

To identify some of the key opportunities and challenges for venture philanthropy in Europe.

2. Context for the emergence of Venture Philanthropy in Europe 2.1

The nonprofit sectors within Europe are rooted in very different historical, cultural, and social traditions. The sectors therefore vary in terms of: size, legal frameworks and regulations, relationship with the state and more specifically the degree of independence from government, and the proportion of funding that comes from the state and from private philanthropy.

2.2

In all countries philanthropy plays a much smaller part in funding nonprofits than government grants and contracts, or individual membership fees and service charges. Grant-making philanthropic foundations provide in the region of 2% of the total nonprofit sector income across Europe. Philanthropic giving in Europe is between 0.1 and 1% of GDP, compared with the US where giving stands at about 2% of GDP.

2.3

Research shows that, between 1990 and 1995, there was significant growth in the size of the nonprofit and philanthropic sectors in all countries, of between 20 to 30% in terms of full-time employment. The growth in sector size has been accompanied by a qualitative change in the nature of the sector. In particular nonprofit organisations are seen as playing a key and increasing role in:

2.4

•

the provision of social services, often contracted by local or central government;

•

innovating and developing new forms of social provision, thereby contributing towards the ‘problem-solving capacity’ of modern societies;

•

the emergence of new forms of socio-economic organisations which simultaneously address social and economic needs, sometimes referred to as ‘social enterprise’;

•

enhancing social capital and democratic citizen engagement, as levels of political interest and involvement are reported to be declining, and there is interest in more personal and local forms of engagement.

As a result of this growth and change there are specific needs within the nonprofit sector which new initiatives such as venture philanthropy may help to address: •

improved management expertise and organisational capacity within a wide range of nonprofit organisations, so that they can better meet the expectations of government and the public;

•

more secure, responsive and flexible forms of funding which can meet the operating and growth needs of nonprofits;

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•

increased awareness and understanding within society as a whole of nonprofits as significant players contributing to modern economies.

3. Venture Philanthropy 3.1

Venture philanthropy emerged in the US in the late 1990s, emerging initially out of the dot.com boom and the idea that the success that so many people had experienced in business could be extended to the nonprofit sector. More specifically, interest in venture philanthropy was prompted by a 1997 article in the Harvard Business Review entitled “Virtuous Capital: What Foundations Can Learn from Venture Capitalists” by Letts, Ryan and Grossman.

3.2

Venture philanthropy is modelled on venture capital and characterised by: •

the provision of expertise alongside financial support;

•

a focus on organisational development;

•

long-term and close relationships;

•

performance and impact assessment;

•

clearly developed exit strategies.

It has brought a new language and a new range of concepts from venture capital into the nonprofit world, thereby enabling people from business to relate to and engage with nonprofits, and enabling nonprofits to learn from business practices. 3.3

Venture philanthropy has also been subject to a number of criticisms and has prompted wide ranging debates about the nature and role of philanthropy. Criticisms initially centred on the inappropriateness and incompatability of transferring learning from business to nonprofits, and latterly focused on more practical concerns that little new money has been raised and that it is still very difficult to demonstrate effectiveness and social impact in the rigorous way that venture philanthropists aspire to.

3.4

There are an estimated 40 to 50 venture philanthropy funds in the US now. Whilst venture philanthropy has not brought in large amounts of new money, it has experimented with more creative grant-making practices, it has focused attention on core organisational issues which had been sidelined with the emphasis on project funding, and it has challenged philanthropists to demonstrate their impact and effect. In addition it has contributed to the range of philanthropic identities that are open to philanthropists, and especially those entering the field for the first time, creating new communities of donors.

3.5

It is possible to identify four specific ways in which venture philanthropy is likely to make its mark and have the greatest impact: •

bringing in new money and expertise to the nonprofit sector;

•

influencing existing donor practices;

•

establishing new types of relationships between donors and nonprofits, which are more equal;

•

improving the impact and effectiveness of specific nonprofit organisations.

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All of these are said to contribute to ‘social impact’ and improving the effectiveness of philanthropic practices. 4. Forms of Venture Philanthropy in Europe 4.1

Venture philanthropy started to be taken seriously in Europe during 2000, and by 2005 several venture philanthropy organisations had been launched and started to operate within different Europe countries. Much of the interest comes from finance, venture capital and business more generally, as well as some interest among existing grant-making foundations. There is considerable learning from experiences in the US and the adaptation of models developed there, as well as the development of some highly creative and original approaches specific to the European context.

4.2

Founders and funders. There are four main ‘founders and funders’ of venture philanthropy organisations: •

Wealthy individuals, who often have a finance or venture capital background, and invest their personal money into setting up the venture philanthropy initiative.

•

Nonprofit organisations, which are looking to raise funds for their own work or for the work of their membership or associated organisations.

•

Companies and corporations which are looking for a more consistent and engaged way of supporting social causes, though they seem less likely to use the term ‘venture philanthropy’.

•

Government departments or public agencies, which may work in partnership with other organisations to initiate a venture philanthropy organisation, but are unlikely to be the sole instigator.

In many cases the financing is provided collaboratively by a small group of individuals who seed fund the initiative, and are then able to attract resources from other sources, including individuals, existing grant-making foundations, companies and, occasionally, public bodies. 4.3

Main organisational forms. Four main organisational forms of venture philanthropy in Europe can be identified: •

Endowed or fully-funded venture philanthropy organisations. Occasionally there is a single donor who fully funds a venture philanthropy organisation, and this may be an individual, government or a company.

•

Partly-funded venture philanthropy organisations. The most common form of venture philanthropy initiative involves several funders working together and raising resources from a range of other sources.

•

Venture philanthropy-fund creation organisations. In some cases non-profit organisations initiate venture philanthropy organisations, gaining support from philanthropists and others, for new funds.

•

Service provision and brokerage. There are a number of specialist advisory and support organisations, often brokering relationships and partnerships

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between philanthropists and nonprofit organisations, or between relevant business expertise and nonprofits. 4.4

Purposes and Goals. Most venture philanthropy is directed towards domestic organisations, though there is also significant interest in supporting international organisations, both those based within Europe and working abroad, and those which are indigenous to developing countries. There are a variety of causes supported, and some venture philanthropists are more interested in identifying an organisation with potential than the specific cause, whilst others have a particular focus, for example on education or crime or youth. Social enterprise is a popular cause, and this may be because the development of self-generated income provides an obvious benefit to sharing expertise from business. Venture philanthropists are interested in enhancing the social impact of an organisation, and therefore tend to look for organisations with strong, often ‘social entrepreneurial’, leadership, and a desire to grow, replicate, merge or undergo some other form of ‘step change’.

4.5

Levels and forms of financial support. Venture philanthropy emphasises the establishment of long term partnerships. However, at present venture philanthropy has not been around for long enough to ascertain exactly what is meant by ‘longterm’. Most state that support will be for 3 to 5 years, with some implying support for up to 10 years. The type of financing most often offered is grant funding, but a wide range of other financial tools are being developed, including loan funding, capital finance, shared equity and bonds.

4.6

Levels and forms of engagement. Venture philanthropy emphasises high engagement as essential to the investment relationship. This often starts with an in-depth assessment process leading to an agreement between the venture philanthropy and the nonprofit of the needs and priorities for support. The expertise then offered might be directly from the venture philanthropy organisations, from experts volunteering from business, or from specialist consultancies which are paid for by the venture philanthropist.

4.7

Monitoring, impact and exit. A variety of different evaluation and performance measurement tools are being developed by venture philanthropists. Two popular tools are ‘Social Return on Investment’ (SROI) and the balanced scorecard. Because of the short timescales of venture philanthropy it is not yet possible to assess its impact or how it manages exit strategies.

5. Obstacles for Venture Philanthropy in Europe 5.1

The name. Much philanthropic giving in Europe is carried out privately and discretely, where venture philanthropy is often seen as high profile and may therefore be off-putting for some philanthropists. The very term ‘philanthropy’ is viewed in some countries as old fashioned, and contrasts with the image of venture philanthropy as modern and progressive. Similarly, for some, ‘venture’ is associated with risk taking and is viewed as an inappropriate approach for tackling social problems.

5.2

Nonprofits. Many nonprofit organisations are inexperienced in managing high engagement relationships. And as yet there is little information published about venture philanthropy from the nonprofit perspective, so there is little understanding and preparedness for what venture philanthropy has to offer.

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5.3

The Venture Philanthropy model. Venture philanthropy is in the early stages of development, and its cost-effectiveness and ability to have lasting social impact are not yet demonstrated. It is also not yet clear whether venture philanthropy organisations themselves are financially sustainable, and several depend on annual donations from their founders to cover the management and administration costs.

6. Opportunities for Venture Philanthropy in Europe 6.1

New resources. Many venture philanthropy funds are actively fundraising, and have the potential to attract new funds as well as expertise to the nonprofit sector. Venture philanthropy tends to operate as a collaborative effort and this may also provide new opportunities for people to engage with philanthropy and social causes.

6.2

Influence. There are some indications that ideas from venture philanthropy may influence private and government donor practices, and specifically in focusing support on the organisational development and capacity of nonprofits as a critical way of enhancing impact and effectiveness.

6.3

New relationships. Venture philanthropy in Europe takes on many different forms, creating and experimenting with different types of relationship between ‘investor’ and ‘investee’ which may prove more productive than that between ‘donor’ and ‘recipient’. Venture philanthropy has the potential to support the development of a new common language and more equal partnerships.

6.4

Improved nonprofit effectiveness. A central purpose of venture philanthropy is to improve the organisational effectiveness and social impact of supported nonprofit organisations, and retaining this focus and demonstrating it is important in proving the worth of venture philanthropy.

7. The future of Venture Philanthropy in Europe Venture philanthropy in Europe is expanding rapidly, and has the advantage of being able to learn from venture philanthropy experiences in the US as well as established grant making foundations in Europe. Its potential depends on its ability to engage with a wide range of individuals and institutions, from nonprofits to philanthropists to governments, and its ability to demonstrate that its benefits and impact are valuable and cost-effective.

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1. Introduction This report is the first European-wide review of the newly emerging field of venture philanthropy in Europe. Venture philanthropy is a recent development within philanthropy. Initial interest can be attributed to the publication of an influential article in the Harvard Business Review by Letts, Ryan and Grossman (1997) – ‘Virtuous Capital: What Foundations Can Learn from Venture Capitalists’. Adopting some of the approaches developed within the venture capital industry, venture philanthropy is defined as providing both finance and expertise to support the organisational development of charities, non-profits, and others pursuing a social mission. It is often contrasted with ‘traditional’ grant making, as providing longer term support and as focusing on organisational issues, capacity building and improving impact and effectiveness, rather than funding projects and programmes. Venture philanthropy is associated with organisational growth and replication, with social entrepreneurial leadership, with shared risk and partnership, and with performance measurement and social impact evaluation. As a distinct field of organisational activity, venture philanthropy was first established in the USA during the 1990s, drawing specifically on the experiences and successes of the venture capital industry, especially following the successes of internet companies during the dot.com boom (Billiteri, 2000). In fact, much of the early interest and practice of venture philanthropy came out of Silicon Valley. During the late 1990s and early 2000s, venture philanthropy started to be explored and developed within Europe. This report is a first attempt to provide an overview of the forms of venture philanthropy in Europe, and to look at the main issues and challenges faced as the field develops. The study was commissioned by the European Venture Philanthropy Association (EVPA) in November 2004. The research was carried out between December 2004 and May 2005.

Purpose and goals of this study There are several overlapping purposes to the study: •

To provide an accessible overview of the development, the levels of activity and the emerging forms of venture philanthropy in Europe for people interested in venture philanthropy and philanthropy in general;

•

To identify the key opportunities and challenges for venture philanthropy in Europe;

•

To provide guidance for EVPA in developing its services, plans and priorities for the next few years.

It is also hoped that the research process and the final report will raise awareness and understanding of venture philanthropy and EVPA’s role, as well as provoking some responses and debate.

Rationale and approach Much of what has been written about venture philanthropy to date is descriptive and often promotional – generally offering rationales for venture philanthropy and its effectiveness. This study attempts to offer a more analytical approach. In conducting this research I

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have welcomed some of the more sceptical comments, and have attempted to draw out some of the limitations and problems faced by venture philanthropy organisations alongside its advantages and potential. It was initially thought that this study could map the levels and forms of venture philanthropy throughout Europe. It quickly became apparent that an in-depth mapping exercise was not the most appropriate approach for a number of reasons: the field is very small and is changing so rapidly that any attempt to capture the whole field would be immediately out of date; much venture philanthropy activity is currently out of sight, and the resources required to identify and explore it in detail in each European country would be considerable; and, finally, the time and resources available were best spent focusing on a few countries, a selection of venture philanthropy initiatives, and in analysing and assessing the findings. Therefore, this study focuses on a range of different venture philanthropy initiatives in several European countries, without claiming to cover the whole of Europe or every initiative that exists. Information and data about venture philanthropy was collected in a variety of ways. Interviews were conducted with 24 people, in most cases in person and in a couple of cases, over the phone. This included a mix of venture philanthropists, advisers and consultants to venture philanthropists, and staff heading up and working within venture philanthropy organisations. Information was also gathered through a questionnaire that was sent to a small number of organisations it was not possible to meet with directly. In all cases the focus was on talking with organisations and individuals who are using the term venture philanthropy, rather than attempting to identify the range of exiting donors who might be using venture philanthropy techniques, but are not using that term or who even distance themselves from venture philanthropy. Those who contributed to this study are listed at Appendix B. Further information was obtained from websites and from documents provided by the organisations themselves. And finally, those directly involved with the EVPA itself had a wealth of information and experience that informed the final report.

The organisation of this report This report is set out in two main parts. The first part – Setting the Scene – introduces and provides an overview of venture philanthropy, clarifying definitions and outlining some of the main learning to date, based largely on experiences in the USA. It also sets a context for the ‘social’ sectors in Europe, providing an overview of the charitable or nonprofit fields, including philanthropy. The second part – Venture Philanthropy in Europe – presents the research findings and is the main substance of this report. It describes some of the different forms of venture philanthropy, reviews the main issues facing venture philanthropy, and offers some thoughts on the trends, challenges and potential of venture philanthropy in Europe.

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Part One: Setting the Scene 2. The nonprofit sector and philanthropy in Europe This section seeks to set the context for the development of venture philanthropy in Europe by briefly outlining some of the main dimensions and trends of the nonprofit and philanthropic sectorsi. The nonprofit sector is characterised more by plurality and diversity than commonalities. Here, for reasons of brevity, the picture painted is necessarily broad brush, and is an attempt to capture both some of the common issues and trends found within Europe as well as highlighting often very profound cultural, social and political differences between the sectors in the different countries. It goes on to consider the specific role that philanthropy, and in particular grant making foundations, plays within this diverse and changing field.

Historical and cultural specificity of the nonprofit sectors In almost any country the nonprofit sector encompasses a rich variety of interests and activities: scout groups, universities, masonic lodges, medical research, chess clubs, dance troupes, football clubs, opera houses, as well as services and advocacy for disabled people, ex-offenders, women and so on. Even given its inherent variety, nonprofit organisations can look quite different in the different countries of Europe – from the large, regionally based, comprehensive, state funded welfare providers found in Germany; to the small local volunteer-based self-help groups in the UK; to the wide-ranging and influential sports movements in Finland. The different cultural and philosophical traditions that shape the sectors in different parts of Europe are evident from the different concepts and terminology used. In the UK, you would talk about the voluntary and community sectors, and ‘compacts’ between government and the voluntary sector enshrining the principle of independence. In France, it would be the economie sociale (social economy) and the principle of solidarity; in Germany Gemeinwirtschaft (community based economics), and the tenet of subsidiarity. The particular form and roles of the sector in any particular country have developed historically, over long periods, and depend on a variety of institutional factors, such as relationships with the state and church. Taking the role of government as a central defining feature, four stereotyped models of the nonprofit sector have been proposed (Salamon, Sokolowksi & Anheier, 2000). These provide a useful, albeit a somewhat simplified and static, way of looking at the nonprofit sectors across Europe: Table 1: Models of European Nonprofit Sectors Countries

Characteristics of NP sector

Role of government

NP sector income

Medium levels of government welfare spending. (A more

Income is predominantly from government grants

Liberal (Anglo-Saxon) UK (an atypical liberal sector)

The NP sector is large, mainly service providing, highly

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(more typically USA, Australia)

typical liberal model would be the USA, where government funding is less significant).

and contracts, fees and charges, with very little from private donations and grant-making foundations.

High government welfare spending, partnering with nonprofit run services.

Mainly funded by government.

The NP sector is small, rooted in voluntarism, and mainly expressive (cultural and sports associations) in function.

High government welfare spending on state run services.

Relies on membership fees and charges for services. Very limited private grant making.

Small and under developed NP sector, mainly sports and recreational associations.

Transitional economies, resulting in relatively low government welfare spending.

Generally low levels of funding, often government dominated.

independent.

Welfare partnership (Corporatist) Germany, Netherlands, Belgium, France, Ireland (less typically Italy and Spain)

The NP sector is large, mainly service providing, dominated by government.

Social democrat (Nordic welfare) Scandinavian countries – Sweden, Finland, Norway.

Developmental Czech Rep. Poland, Slovakia, Hungary

Adapted from the Johns Hopkins Comparative Nonprofit Sector Project

Private philanthropy, both as individual donations and from grant making foundations, contributes relatively little, and on average around 2% of nonprofit income across Europe. Certainly, in most countries the main sources of funding are from government and fees and charges. Philanthropy in Europe stands at between 0.1% and 1% of GDP, compared with US giving of around 2% of GDP. These different models give some idea of the different shapes that the nonprofit sectors in Europe take. Clearly the size of the sector varies enormously, and this has implications for the size of organisations, the level of infrastructure development, and the political influence of the sector as whole in each country. It is also evident that government spending on welfare has often supported the development of a strong and vibrant nonprofit sector, rather than crowded it out, as many might believe. However, these models and broad brush profiles, however, do not give any clues as how the sectors are changing and what dynamics are currently at play, especially given that the nonprofit sector is one of the fastest growing areas of the economy in many countries.

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Growth, change and development paths Growth rates of the nonprofit sector in Europe are reported to have been between 20% and 30% during the five years from 1990 and 1995 in terms of full-time employment, and therefore economic significance. This is well above the growth rate of other areas of the economy. In fact this phenomenon has been referred to as part of a ‘global associational revolution’, and as a significant trend across the world, in both developed and developing countries (Salamon and Anheier, 1996). This part looks at some of the broad trends experienced by nonprofit sectors across Europe that have contributed to this growth. Certainly recent growth is not just a question of size, it also reflects more qualitative and fundamental shifts in the structure of society and the roles and relationships between the state, the market, the individual/household and the nonprofit sector (Anheier, 2002). In many countries governments are actively attempting to redraw the lines of responsibilities and rights, moving away from the traditional old fashioned paternalism of government, and encouraging individuals to take more responsibility for their own welfare. There is also a growing ambivalence and distrust about the effectiveness of both state institutions and businesses in many areas of social provision. This larger context has given rise to a number of specific trends, changes and opportunities in the nonprofit sector. •

Reductions in social welfare provided directly by government, and an increase in social service provision by nonprofits, as well as by private companies.

•

Changes to the legal and regulatory frameworks governing the nonprofit sector have been taking place in many European countries.

•

The nonprofit sector offers an alternative institutional structure to existing government and market based forms of social provision: “The third sector can become a field of experimentation, an area for trying out new ideas that may not necessarily have to stand the test of either the market or the ballot box. In this sense, the third sector adds to the problem solving capacity in modern societies.” (Anheier, 2002: 3).

•

The blurring between sectors, and in particular the influence of business practices and attitudes on both public and nonprofit organisations. Over the last twenty years many nonprofit organisations have become more professional. One of the effects of this pervasive influence of business is the emergence of greater numbers of nonprofit organisations which are geared towards relating to and working with the private sector.

•

The emergence of interest in what has been termed social enterprise in the UK, the social economy in France, social co-operatives in Italy – organisations which simultaneously pursue economic and social goals, as found historically within the co-operative and mutual movements.

•

Interest in the nonprofit sector as contributing towards citizen engagement and ‘social capital’, by fostering relationships between people that create trust and reinforce mutual civic responsibility, and lead to a healthy democracy and economy (Putnam, 2000). The nonprofit sector is seen as enhancing deliberative and

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participative democracy, forms of democracy which are about the active engagement of citizens, about discussion and consensus building, rather than voting for and mandating political representatives. These trends take different forms in different countries. The rise of local and regional social fora in Italy has been an important means through which people can discus political issues, where national politics has proven ineffective. In France, the nonprofit sector is seen as increasingly important in challenging the centralising tendency of the state, though it remains concordant with philosophical commitments to solidarity and equality (Archambault, 2001). Germany has seen the emergence of more politically and market oriented nonprofit organisations, adding a new diversity to the existing corporatist model of the sector (Bode, 2001). Meijs (2004) goes so far as to suggest that the nonprofit sector in the Netherlands is shifting away from a corporatist model and towards a more liberal model. In spite of a number of broad trends that are felt across Europe, the nonprofit sectors remain, on the whole, nationally rooted and oriented There are some signs, however, that this may be changing, and that the emergence of nonprofit action at the European level may be slowly gaining momentum. For one thing, the sense of a lack of a direct democratic voice within the EU is felt by people in many countries. There are also some practical changes happening at the European level, where there are proposals currently being considered for the introduction of new legal forms for associations, foundations and mutuals, which would be registered in Brussels and operate across Europe. There has recently been work and interest in facilitating transnational giving, which to date has been difficult and limited. In particular the legal and tax regulations found in many countries have often not recognised nonprofit activities in other countriesii. However, the growth of the sector, and at times its apparent power, has also raised questions about the legitimacy and accountability of nonprofit organisations. Nonprofits, by definition. are intended to express, pursue and meet the needs of minority or particularist interests, and this has provoked challenges within the context of democracies where notions of a broader public interest are hard to determine with much precision, coupled with concern that those groups which are best resourced and have the loudest voice will gain more. This is an on-going issue for nonprofits to address in terms of their legitimacy and ultimately what roles they can play effectively and what impact they make. There are a lot of changes and developments taking place within the nonprofit sectors across Europe. Four specific areas are identified here which are considered especially significant for venture philanthropy: •

There is a general need for improved management and administration of nonprofit organisations if they are to meet the expectations of government and the general public in providing increased social welfare services;

•

There is a need for more flexible and sophisticated financing mechanisms, and in particular those which can respond to the growth and expansion aspirations of nonprofits;

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•

As their role and contribution increases, nonprofits need to develop better forms of accountability, especially through improving impact and performance metrics in ways that are accessible and meaningful.

•

Nonprofit sectors have tended to operate at the national and local levels, and there are opportunities for more sharing of practices and experiences at the European level, as well as the development of an infrastructure and organisations which operate at the European level.

Role of philanthropy and philanthropic foundations Philanthropy plays a relatively small role in terms of actual amounts of money provided to the nonprofit sector, and this is consistent across Europe. However philanthropy plays a role that other funders cannot – it is thought in particular to have a role in promoting pluralism and diversity, in encouraging experimentation, in supporting innovation and seeding new ideas, and in bringing about change in public policy. Philanthropy was prominent during the 18th and 19th Centuries, as the industrial philanthropists, having accumulated considerable wealth, sought to address a range of social ills. In Europe philanthropy came to be associated with a paternalistic and a patronising attitude to helping people who are less well off, and especially those who were known in the UK as the ‘deserving poor’. In fact, philanthropy has a long tradition that can be traced back at least to Greek times and concepts of citizenship and civic culture, and according to one of its original definitions, philanthropy means ‘love of mankind’, and is certainly not intended as patronising. Grant making foundations are often the vehicle chosen through which to direct philanthropic support to nonprofits, partly because it is a traditional and well recognised organisational form, but also because many of the tax incentives tend to go along with it. Foundations are generally recognised as being independent not-for-profit organisations, pursuing the public benefit in some way, with their own governing body, and with the distinguishing features of having a dependable source of income, often, though not invariably, from an endowment or capital asset base (based on The European Foundation Centre definition). Within this broad understanding, there are many variations within Europe. Laws and regulations, as well as traditions, vary enormously. •

• • •

UK foundations are relatively unusual in that they are almost wholly associated with grant-making. The UK does not have a specific legal form for foundations, but rather relies on trust and company laws, Charity Commission registration, and common law practice. In Spain, most are service providing operating foundations, with only about 5% carrying out grant making. In most countries foundations are a mix of grant making and service provision. In Sweden many foundations are state administered and not independent; in France a government representative sits on the board of foundations as a way of ensuring public accountability for the tax incentives. In most countries tradition tends to the establishment of foundations in perpetuity, but it is often possible to establish time limited foundations. Austria and the Czech

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•

•

•

•

•

Republic distinguishes between ‘foundations’ and ‘funds’ where the latter does not require a minimum capital investment and can use up all its assets. In France, foundations are ‘irrevocable’. The numbers of foundations per 100,000 population varies from 1 in France and Ireland, to 10 in Germany, 16 in Britain, and almost 2,000 in Liechstenstein. Though many of these are not grant makers, and many are not independent of the state or private interests. In some countries specific individual foundations are very influential and effectively define the field of philanthropy and grant-making – for example the King Boudouin Foundation in Belgium and the Fondation de France. In countries where grant making is much less established, there may only be a handful of grant making foundations – for example in Ireland and the Central European countries. In most countries foundations are established with a capital asset, though in the Netherlands no initial capital is required and in Sweden foundations can also be ‘collection’ foundations. Generally an endowment is given as a one off, though in France and Spain the founder can spread his or her contribution over five years. In the Czech Republic, the way in which the assets can be invested is set out in the legislation – and this follows the endowing of a number of Czech Foundations from some of the proceeds of privatisation, and is an attempt to ensure accountability for public funds The asset base of foundations varies from around EURO 345 per capita in Germany to over EURO 1,000 in Italy, Sweden and Spain and as much as EURO 12,000 in Liechstenstein.

A combination of the perplexing definitional and legal situation in Europe and the often very private and secretive nature of foundations makes it difficult to determine with any degree of accuracy the significance of grant-making foundations as a source of funding for nonprofits: where figures are known, it is around 2% of total nonprofit sector income. It is similarly difficult to determine exactly where foundations direct their grants, and again laws, guidelines and practice varies between countries as to how transparent and open they are. With its limited formal accountability, and no need to sell its services or earn its way, philanthropic organisations can be complacent, and often do not demonstrate the professionalism or initiative that they potentially could. During the last ten to twenty years philanthropy and giving practices have started to be taken more seriously again. There are a number of initiatives coming out of the US, where philanthropy is a larger and better developed field, which are influencing donor practices in Europe. Researchers, policy analysts and consultants, as well as grant making professionals, are playing an important role in holding up a mirror to the world of philanthropic foundations, questioning the effectiveness of philanthropy and raising issues of metrics, performance and impact. There are two main trends which can be seen across Europe. First is the emergence of new organisations and networks aimed at encouraging philanthropy and improving practices. These operate both nationally and European-wide. The second is the general growth in numbers of philanthropists.

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Philanthropic networks National Czech Republic

Fórum Dárcu (Czech Donors Forum) (has inspired Donors’ Fora in other Central and Eastern European countries)

1997

Finland

Saatioiden ja rahastojen neuvottelukunta rf (Council of Finnish Foundation)

1970

www.saatiopalvelu.fi

France

Union Nationale des Organismes Faisant Appel à la Générosité du Public (UNOGEP)

1998

www.unogep.org

Germany

Bundesverband Deutscher Stiftungen e.V

1948

www.stiftungen.org

Germany

Maecenata Institut für Philanthropie und Zicilgesellschaft

1997

www.maecenata.de

Ireland

Philanthropy Ireland (Irish Funders Forum)

1998

www.philanthropyirela nd.ie

Italy

Associazione Italiana Fondazioni e Enti di Erogazione (Assifero)

2003

www.assifero.org

Poland

Akademia Rozwoju Filantropil

1998

www.filantropia.org.pl

Portugal

Centro Português de Fundaçöes

1993

www.cpf.org.pt

Spain

Asociación Española de Fundaciones

2003

www.fundaciones.org

Slovakia

Fórum Donarov

2000

www.donorsforum.sk

UK

The Association of Charitable Foundations (ACF)

1989

www.acf.org.uk

UK

The Institute for Philanthropy

2004

www.instituteforphilan thropy.org.uk

UK

Philanthropy UK (set up by ACF to promote new philanthropy)

Time limited: 20012004

www.philanthropyuk.o rg

UK

The Giving Campaign (set up by the government to encourage a culture of giving)

Time limited: 20012004

www.givingcampaign. org.uk

www.donorsforum.cz

(Data taken from Wings website: www.wingsweb.org/network on 18 May 2005) European • The European Foundation Centre – an association of philanthropic foundations working in Europe – was established in 1989 (www.efc,be) • The European Association for Planned Giving (EAPG), (www.plannedgiving.org.uk) • The European Venture Philanthropy Association (EVPA), set up in 2004. International • WINGS – an international network of grant makers – was formally established in 2000 (www.wingsweb.org)

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There has also been significant growth in the number of grant making foundations over the past twenty to thirty years, though not equally throughout Europe. Certain countries have experienced more pronounced growth, such as Italy, Britain, Germany and Scandinavia. Other areas have seen slow growth rates, such as France and Belgium, and in these cases the limited growth is attributed to ‘legal and procedural’ factors as well as ‘political and cultural reasons’ (Anheier, p67). In some cases growth can be put down to a particular national factor, and this is clearly the case in Italy, where the 1990 Amato law on the privatisation of the banking sector led directly to the establishment of many new and well-endowed foundations. Foundations are often seen as politically neutral and an increasingly popular structure through which business, governments and individuals can pursue certain social causes and interests, as has been the case in holding assets of Holocaust victims in Switzerland (Anheier, 2002). In addition, there has been an increase in personal wealth within business, and some people have started to look for ways in which they can act philanthropically, though they often find it difficult to relate to the established field of grant making. There seems to be a coming together of three streams which are influencing the way in which the practice of philanthropy is evolving. First are the opportunities and needs arising from the changing context experienced by nonprofits and the growth of the sector. Second is a push from existing grant-makers, together with those who advise and sit on the edges of the grant making world, to improve practices, to think more critically about what they do and how they do it, and to focus on how they can best make the sort of impact they want. And third are the potential new philanthropists who do not relate to existing forms of grant-making and want to imprint the field with their own visions and styles. And certainly there are many new approaches and practices which are developing in response – including the subject of this report, venture philanthropy.

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3. Venture philanthropy This section introduces the concept and practice of venture philanthropy in more detail, drawing especially on experience from the US.

Definitions and concepts The concept of venture philanthropy was first introduced in the article “Virtuous Capital: What Foundations Can Learn from Venture Capitalists” by Christine Letts, William Ryan, and Allen Grossman (1997:36-44) published in the March/April 1997 Harvard Business Review. The article argues that grant-making foundation are failing to achieve their goals, and proposes the adoption of venture-capital practices such as risk management, performance measures, close and long term investor-investee relationships, and exit strategies. These provocative arguments stimulated discussions in donor and nonprofit quarters about new and more effective ways of conducting philanthropy, and motivated the field into thinking critically about donor practices (Sievers, 1997:1). Venture philanthropy means different things to different people, though there are common elements in most definitions, and similarities are more apparent than any deep seated differences: • • • • •

The provision of expertise alongside financial support; Support for the organisational development and core costs of nonprofit organisations; Long-term and close relationships between investors (donors) and investees (grantees); A focus on performance measurement and impact evaluation. Developing exit strategies which ensure the development of sustainable nonprofit organisations – sustainable in terms of organisational structure, strategy and skills, as well as financially

It is clear from these elements that venture philanthropy focuses on the organisational level of intervention, rather than for example the sector level or field level. In addition, venture philanthropy often seeks to support organisational growth and replication as a means of enhancing beneficial social impact, and prioritises developing exit strategies which support organisational sustainability and effectiveness. Venture philanthropy is frequently contrasted with ‘traditional’ grant making, which ‘traditionally’ focuses on funding specific projects and programmes for shorter periods, often between 1 and 3 years, and is prone to cease funding without much thought as to the future of the initiative or service being provided. One of the intentions of venture philanthropy is to shift attention towards the need for strong and expert nonprofits organisations as central in determining what difference nonprofits make and how they make that difference. Whilst venture philanthropy models itself on venture capital, it is not intended to be, as Carrington (2003) points out, an exact mimicking of venture capital approaches. As Jason Scott (2002) comments “no one in their right mind actually wants to apply the practices of venture capital to non-profits in the ruthless way that VC’s apply them to their companies”. Many venture philanthropy organisations have been initiated by people with experience and a background in venture capital, and may adopt certain principles and

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concepts from venture capital. But, in practice, much has been shaped and moulded to the specific needs and context of the nonprofit world, and many of the specifics of providing appropriate and effective support are different from those found in venture capital.

Significance Venture philanthropy has been prompted by the more entrepreneurial character of the “new donor”, at the same time as responding to particular needs within the nonprofit sector (Wagner, 2002:343-345). Venture philanthropy is part of a small revolution that seems to be taking place, involving new thinking and new practices on the part of donors, supporters and partners to nonprofit organisations. It has developed alongside and overlapping with, ‘effective philanthropy’, ‘social justice philanthropy’, ‘high engagement philanthropy’, ‘strategic philanthropy’, as well as trends in ‘corporate social responsibility’, ‘public-private partnerships’, ‘social enterprise’ and ‘social entrepreneurship’. It is part of a move to experiment with a range of different financial tools and forms of engagement in order to support nonprofit organisations more effectively. In many ways it can be seen as part of the development of a larger and more mature nonprofit sector, which requires more sophisticated financing mechanisms and support services. More specifically, venture philanthropy can be seen as part of a response to the on-going problem experienced by many nonprofit organisations of how to fund their core organisational costs. Core administration, management and development costs have become increasingly unpopular amongst funders, as short term project funding has become the norm for grant-makers, and individual donors have become more vocally concerned that their money is directed to the cause and is not ‘wasted’ on administration. Venture philanthropy also provides a new form of relationship and means through which knowledge, experience and skills can be transferred from the for-profit to the nonprofit sector – and potentially shared on an equal basis between sectors. For Nicole Etchart and Lee Davis (2002:4-7) venture philanthropy is about engaging a new type of philanthropist, and bringing new resources to the nonprofit sector. Venture philanthropy provides a language and tools for potential donors who otherwise do not relate easily to more establishing philanthropic practices. One of the most striking aspects of venture philanthropy, especially for those from the nonprofit sector, is the use of business terminology, often taken directly from the world of venture capital (Frumkin, 2003): terms such as ‘due diligence’, ‘risk assessment’, ‘capital markets’, ‘equity investment’, ‘return on investment’, ‘portfolio’. This not only helps business people relate to philanthropy, but potentially brings in new concepts and ways of thinking into the nonprofit world and helps to create a common language between sectors, providing a means through which mutual interests can be identified and stronger partnerships can develop. Along similar lines, Jason Scott (2002:57) comments that venture philanthropy can be used to “progress philanthropists towards more effective and problem-focused grantmaking and to enable them to become more well rounded citizens and activists outside their philanthropy.” As such, it is about influencing and improving existing donor practices, and about encouraging an emphasis on impact and outcomes, rather than on a

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more woolly sense of ‘doing good’, as well as greater accountability and transparency amongst donors. Venture philanthropy is recognised as not involving large sums of money, and there is little evidence that it has brought in significant amounts of new money. In the US, Scott (2002:53) found that venture philanthropy distributed $40 million to nonprofits in 2000, compared with approximately $806 million distributed by the Ford Foundation or the $211 million donated by the Rockefeller Foundation in that same year. Pepin (2004) noted that there are 42 venture philanthropy funds in the US, with assets of around $400million. Perhaps more important than the sums involved, venture philanthropy represents an injection of creative thinking, and it has prompted debate and focused attention on the impact and effectiveness of philanthropy.

Critiques and debates Much of the criticism of and debate surrounding venture philanthropy has come from established foundations in the US. Criticisms were initially largely conceptual, though over time more practical experience and evidence is being drawn on in assessing the value and contribution of venture philanthropy. Some see venture philanthropy as nothing new, and simply a novel term for basic good practice in grant-making (see Etchart and Davis, 2002:4). In fact the most significant early criticism was that venture philanthropists were arrogant and patronising (see Skloot; also Scott, 2002). Michael Bailin, from the Edna McConnell Clark Foundation commented that venture philanthropists “are not always familiar with the non-profit world, or how the non-profit world works. They are not familiar with a lot of the challenges non-profits have to deal with, the values that animate people in the sector, or the complexities that attend improving the lives of less advantaged kids or other underserved populations” (cited in Carrington, 2003:1). These attitudes have tempered over time, as nonprofits have started to experience benefits from the venture philanthropy approach, and as venture philanthropists have admitted to a certain arrogance and have recognised the existence of, and their need for, nonprofit expertise. In general criticisms of venture philanthropy focus on the incompatibility between the sectors, and inappropriateness, or at least difficulty, of transferring practices and models from the for-profit to the nonprofit arenas. Sievers (1997), sees the worlds of nonprofit and venture capital as fundamentally different because, while the main goal of venture capitalist investors is to have a financial return on their investment, the main aim of nonprofits is to achieve a social return, that is to improve the lives of poor communities and influence positive changes in public policy. Another key difference is suggested to be the use of quantitative measures in the for-profit sector which are not be so useful in assessing nonprofit social impact (Sievers, 1997). As well as these conceptual concerns about venture philanthropy, there are some specific concerns about the practice of venture philanthropy in the US. In a review of US venture philanthropy and its potential relevance for the UK, Carrington (2003: 2) commented that “many of the [venture philanthropy] grants made seem very conservative in purpose, far from innovative”. Certainly, venture philanthropy has tended to focus on organisational development within social service delivery, rather than on advocacy, campaigning, research or public policy, which could be said to be necessary for tackling the underlying

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causes of social problems (Scott, 2002). Scott calls for a greater attention to what he calls ‘social change’ grantmaking, which seeks to tackle the causes of “complex problems like poverty, racism, and violence” by using a range of complementary approaches, including, for example, “grassroots organizing, philanthropy, direct service, mass media, and public policy advocacy” (p7). On the other hand, this is an issue for all grant makers interested in creating positive social impact. Venture philanthropy does seek to emphasise the impact and effectiveness of grant making and the supported organisations, and as the available resources increase, venture philanthropy is therefore in a strong position to engage with social change issues on a broader strategic level. Second, is what Sievers (1997) argued as one of the most valuable aspects of nonprofits in the US – their independence from the state and market, which could be easily undermined by overly enthusiastic or inappropriate donor or investor involvement. In Carrington’s (2003:9) overview of venture philanthropy in the US, he found that an overly intrusive donor/investor “turns out to be the single most troublesome factor for non-profits who have been venture philanthropy recipients.” As yet there is limited experience in Europe to ascertain whether this is an issue or not, though most anecdotal information gives a sense of the positive experiences of nonprofits when they encounter venture philanthropy.

Examples By 2005, there were several venture philanthropy initiatives that have been operating for a number of years, and are established on the philanthropic landscape. The organisations detailed in the table below are a selection of those that have had influence on the thinking and development of venture philanthropy in Europe. It is, however, also worth noting that several venture philanthropy funds, launched in the US during the 1990s, folded a year or two after their creationiii. Some of this was no doubt due to the bursting of the internet bubble and economic recession which affected many of the new wealthy. Some was probably a natural and healthy process in the development of a new organisational field as some approaches demonstrated their value and others, equally importantly, showed what does not work.

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Table 2: Examples of Venture Philanthropy Organisations in the US venture philanthropy org.

Funding sources

Size and offices

Purpose

Where

Portfolio

REDF (Roberts Enterprise Development Fund)

Operational expenses underwritten by Board of Directors’.

One office in San Francisco, California;

Support social enterprise development to alleviate poverty

San Francisco Bay Area

5 organisations

Donations from other investors go directly to programmes and services.

6 staff members.

Expects a social return on their investments.

Signature Partners provide expertise and consultancy

One office in Cambridge, Massachusetts;

To support social entrepreneurs and their organisations to achieve and scale and impact. Focus on education, workforce development and civic engagement.

National

9 organisations, each with investments of between $300k to $1.5 million

Invests in high potential nonprofit organisations. Focus on children’s organisations.

National

10 organisations, each with capital commitment of between $325k to $3 million

www.redf.org

New Profit Inc. www.newprofit. com

Institutional investors provided start-up and capacity building support

5 staff members.

Individual investors provide core financial support Executive partners provide voluntary expertise and support to portfolio orgs. Venture Philanthropy Partners (venture philanthropyP) www.venturepp. org

Founding investors provide early capital support

One office in Washington DC;

Institutional investors

13 staff members.

Co-investors provide funding and expertise to portfolio orgs. Operations funder – the Morino Institute provided all initial operational funding

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Sventure philanthropy partners make an annual financial contribution of at least $5,000 a year for two or more years and provide voluntary expertise and time to investee orgs.

One office in Seattle, WA;

Robin Hood Foundation

Operational costs underwritten by Board of Directors.

www.robinhood. org

Donations from individuals and companies.

Acumen Fund

Seed capital from the Rockefeller Foundation, Cisco Systems Foundation and three individual philanthropists.

Social Venture Partners International (Sventure philanthropyI) www.svpi.org

www.acumenfu nd.org

On-going support from: individuals, foundations and corporations.

To practice engaged grant making, and to catalyse smart giving through supporting local Sventure philanthropys, and ultimately to support long term positive social change.

23 communities of Sventure philanthropys in the US and Canada

One office in New York City; over 60 staff members.

To tackle poverty. Focuses on early childhood, education, jobs and economic security, survival.

New York

146 organisations

One office in New York City;

Supports enterprise which help to tackle poverty. Focuses on health technology, housing and finance, and water innovations.

International

14 organisations. Pledged $6.8 million, of which $3 million has been committed

4 staff members.

8 staff members.

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Promise and potential Venture philanthropy is as yet a young and unproven development in the field of philanthropy (Reis, 2000; Community Wealth Ventures, 2002). It has certainly generated a wave of interest and debate, much greater than would be implied from the sum of money being provided or number of actual venture philanthropy organisations. In a review of venture philanthropy in the US, Billiteri (2000) quotes one of the leading figures in the venture philanthropy world: ‘“The question is,” Mr. Morino says of venture philanthropy, “will it really change something?”’ It is possible to identify a number of specific ambitions within the field of venture philanthropy, and four are set out below as the main ways in which venture philanthropy organisations could demonstrate the value and worth of the approach: (i) Bringing new money and expertise to the nonprofit sector Much of the writing on venture philanthropy emphasises the opportunities for new money to be spent on social issues: “Proponents of venture philanthropy defend their approach, saying that their aim is to catalyze a new generation of donors and encourage them to build the capabilities of non-profit organizations” (Billiteri, 2000). In the US, much of this new personal wealth came out of the technology boom there – the people Skloot referred to as ‘Mega-Wealthy’ – and was strongly associated with young successful entrepreneurs. But venture philanthropy has also attracted interest from a wider range of people, those working in finance and business more generally, who can offer considerable expertise and knowledge to the development of venture philanthropy, and this is certainly true of the experiences in Europe. Venture philanthropy is said to provide a more attractive means of philanthropy than traditional forms for such people, those who are familiar with the language and methods of business and who want to be involved as well as give their money. By emphasising organisational engagement and the achievement of tangible results in tackling social issues, venture philanthropy promises more directly rewarding philanthropic experiences. However, as mentioned earlier, the actual amounts of new money that have come through venture philanthropy are still very limited. Most new money comes through more traditional fundraising and grant making activities. Though there is still considerable promise that venture philanthropy will attract new money, it is likely to be a longer road than first anticipated. Venture philanthropy also aims to bring in the relevant business expertise and experience to support the development of nonprofit organisations. Certainly nonprofit organisations often consider this the most helpful contribution of venture philanthropy. Equally, venture philanthropy offers a means through which those experienced and successful in the commercial sector can learn about and better understand social issues. And it may be that bridging sectors will be one significant impact of venture philanthropy. (ii) Influencing existing donor practices Some writers consider the most important effect of venture philanthropy as influencing existing donor practices. The high profile promotion of venture philanthropy provoked debate, and brought about a certain amount of reflection on the part of established grant makers. It is suggested that some donors have adopted more progressive and engaged forms of philanthropy partly as a result of this, even where they are not referring to it as venture philanthropy (Pepin, 2005). There is thought to be particular potential amongst corporate

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donors, where the language and mentality of venture philanthropy may resonate more than with government or established foundations. (iii) Creating new types of relationship between nonprofits and their supporters A central characteristic of venture philanthropy is in assessing the specific needs of a nonprofit and aligning these with a tailored mix of financial support, expertise and organisational interventions. Not only does this directly address the needs of nonprofit organisations, but also provides new ways for philanthropists and donors to engage with nonprofits. This may be a more attractive option for some potential philanthropists and donors, as it creates opportunities for them to apply their experience and knowledge from business in ways which fit the nonprofit sector. Much of this is underpinned by the idea of developing new forms of relationship between ‘donor’ and ‘recipient’, and has been accompanied by a change in language to ‘investor’ and ‘investee’, which is intended to signal a more equal partnership. Most venture philanthropy uses a mix of grant funding and expert consultancy, though some venture philanthropists are also experimenting with developing new financial tools and mechanisms. This includes providing matched funding, loan financing and equity investment, and as such venture philanthropy is part of a wider movement which is seeing the emergence of a more sophisticated range of financing tools than simply grant funding. This increases the range of options open to donors, as well as better tailoring support to the specific needs of the nonprofit organisation. (iv) Improved impact and effectiveness of nonprofit organisations. This is clearly one of the most important ambitions of venture philanthropy, though it is in fact rarely mentioned in the literature as something which needs to be demonstrated or proven. Venture philanthropy is premised on the need for nonprofits to be become more professional, more business-like, and even more competitive and commercially minded. It is assumed that by focusing more on certain tools and processes which have been well developed and applied in the business world – such as marketing, business planning, financial management, strategic development – that the impact and effectiveness of nonprofits will improve. These are tools and processes which are appropriate to some nonprofit organisations and not to others. Venture philanthropy tends to focus on organisations which demonstrate the desire and potential to grow through replication or expansion, and is often most interested in organisations which are operating nationally or have the ambition to do so. One phrase which is sometimes used is ‘getting more mission out of the door’, and the intention is to spread practices which are known to work and to extend positive social impact. One of the main challenges for venture philanthropy is in demonstrating that organisations do become more effective following venture philanthropy interventions, and that they do have a greater positive social impact. Though there are many well developed monitoring practices in the sector, there is far less understood about how to measure and evaluate social change and social impact.

These four specific ambitions are highlighted as central if venture philanthropy is to fulfil its potential contribution to enlarging and enriching the fields of philanthropy and the nonprofit sector more broadly. The actual effectiveness of venture philanthropy, and ultimately its impact, is as yet unclear. Experiences in the US have shown how difficult it is to assess and understand such impacts and it may well be that developments in European will add

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considerably to the potential of venture philanthropy, by bringing in a range of different experiences and motivations and also by internationalising practices.

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Part Two: Venture Philanthropy in Europe Venture philanthropy is spread very differently in different parts of Europe. The term ‘venture philanthropy’ has found greatest acceptance in the UK, and is somewhat less widely used in continental Europe. There are therefore more organisations identifying themselves as venture philanthropy within the UK, though within Europe as a whole it is possible to identify organisations which use many of the practices advocated by venture philanthropists without necessarily using the terminology. Nevertheless, the number of philanthropic organisations which can be thought of as venture philanthropy are small, and, at the time of writing, stands at around 20 to 30 across Europe. Venture philanthropy was raised and discussed seriously in the UK during the late 1990s. In some cases ideas were brought over by Americans working in the UK and ‘translated’ for the more European context. For example Henry Drucker’s paper that was promoted by the School for Social Entrepreneurs. In other cases, UK philanthropists were looking for new ways of giving money themselves, and after visits to America came back with a number of ideas which they adapted from US models. A number of initiatives started to be developed, but in the late 1990s much of this was talk rather than substance. Nevertheless development did take place, and by early 2005 there were a handful of venture philanthropy type initiatives operating, and venture philanthropy is being taken up with some enthusiasm, and in different ways, by new philanthropic donors as well as established trusts and foundations, and even government departments. The idea has spread through Europe, albeit more slowly than within the US, and this may be because of the more significant role of the state in providing social welfare, different cultural, historical and political characteristics and trends, and the lower levels of personal wealth. However, there are strong proponents of venture philanthropy to be found in most countries. A few years ago, the field of venture philanthropy in Europe could have been characterised more by the amount of talk and discussion surrounding it than actual activity; now it is best characterised by the level of experimentation and learning, as venture philanthropy organisations get off the ground and start to operate. In this second part of the report, the main findings from the research into venture philanthropy in Europe are presented. This part is divided into three sections. The first section offers a description of the types and forms of venture philanthropy that have developed in Europe. The second section provides more of an analysis of the issues, the limitations, and the challenges facing venture philanthropy in Europe – the opportunities and obstacles. And the third section offers some more speculative thinking on the trends within and affecting the field of venture philanthropy and its potential within Europe.

4. Forms of venture philanthropy in Europe There are a variety of forms of venture philanthropy organisation that currently fit under the somewhat broad term of venture philanthropy. All the venture philanthropy organisations looked at for this research have different origins, different purposes and work in different contexts, and therefore it is entirely appropriate they different forms and styles of operation have developed. In fact, no two venture philanthropy organisations were the same, though there were several similarities in particular practices and issues they were experiencing. This section describes some of the different forms of venture philanthropy that can currently be

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found in Europe. It looks in particular at the range of actors in the field and the varying origins of venture philanthropy organisations, together with the different forms of financing and engagement that are provided, and the ways in which the central issue of performance measurement and evaluation are being approached.

Founders and funders The distinctive interest in venture philanthropy within Europe has arisen largely out of the field of financial investment, and especially venture capital. There is a natural synergy and a similar, if not entirely identical, language and thought process – what has been characterised as an ‘investment mentality’ in contrast with the ‘traditional’ grant mentality found in the nonprofit and philanthropic sectors (see for example, Billiteri, 2000; Carrington, Leat, 1992). The main proponents of venture philanthropy are not only the wealthy venture philanthropists themselves, but also a number of nonprofit and even commercially oriented organisations aiming to raise ‘venture’ funds for social purposes. There are a number of consultants who are advising existing and potential philanthropists, and who are interested in promoting more variety and better options both for philanthropists and nonprofits. And there are a number of organisations which can be seen as serving philanthropists, providing advice and information, as well as carrying out some of the grant making. There are, in addition, researchers and academics, nonprofit and philanthropic umbrella organisations, policy think tanks, and established grant makers, who are interested in promoting new forms of philanthropy, and may also be involved in encouraging venture philanthropy. In other words, the field is not only defined by venture philanthropists themselves, as wealthy individuals largely from the commercial world of finance and investment, but by a range of other actors, many of which come from the nonprofit sector, and some from academia, policy-making and government. Founders of venture philanthropy initiatives; There are four groups that found venture philanthropy funds: • Wealthy individuals, who are likely, though not necessarily, to be the founding and core funders of the new venture philanthropy organisation. They may be working individually or collaboratively. • Nonprofit organisations, and sometimes for-profits or partnerships, aiming to establish a venture fund. They may not have the resources themselves to provide funding, but seek to raise support by attracting contributions from others. Again, they may operate singly or collaboratively. • Companies and corporations, which have developed their corporate giving along the lines of venture philanthropy, though they seem less likely to use the actual term venture philanthropy. • Government departments or public agencies, though they are unlikely to be the sole initiator of a venture philanthropy fund, but rather to be working in partnership with nonprofit representatives and organisations. Level of collaboration: Venture philanthropy organisations are initiated either by a single individual or organisation, or in a more collective and collective way. In fact, one of the striking features of venture philanthropy is the occurrence of joint and collaborative donor funds that are being created. In many cases the role of venture philanthropy as bringing funders and potential funders together, in terms of donor education, collaborative working and community building, is critical. page 29

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Sources, levels and forms of funding: In a few cases there is a single source of funding, and this may be from a founding wealthy individual or company, in the case of a corporate venture philanthropy fund. It may also be from government, as has occurred in the UK. In most cases venture philanthropy funds also need to fundraise, and this tends to be part of the initial vision of creating collaborative funds and raising more money for use in the nonprofit sector. More often initial or founding funders underwrite the operational costs of the venture philanthropy fund, enabling all or most of the additional resources raised to be directed to nonprofit organisations, their ‘investees’. In a few cases initial funding is also provided by established grant makers, looking to expand the infrastructure of funding sources available in the sector. The diagram below shows how financial and expert resources are directed through venture philanthropy in order to achieve social impact and social change.

Resources: - finance - expertise Individuals

Government

Corporates

Other institutional

Venture Philanthropy Funds - ‘investors’ needs assessment, strategy development, funding advice, evaluation

Services/ Brokerage organisations

finance + expertise fund management

assessment and advice

Nonprofit organisations ‘investees’

Social impact/ social change

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Main organisational forms In practise four main types of venture philanthropy organisations can be identified within Europe. They vary in terms of the level of funding, the level of collaboration, and the main purpose. The first three consist of different types of venture philanthropy funds, and can often, though not invariably, be associated with the actions of venture philanthropists as individuals. The fourth type fills more of a service and brokerage function within the emerging field of venture philanthropy, and are similarly often set up and resourced by individual venture philanthropists. More importantly, they are an essential part of the infrastructure of venture philanthropy, providing the means through which resources and information flow and through which relationships are brokered. • Endowed or fully-funded venture philanthropy organisation. These organisations are initiated by and fully funded by one or more individual philanthropists or institutional donor. The donor may be a single wealthy philanthropist, or it may be an institutional funder such as government or a companyiv which provides a reasonably dependable income. Examples: ACT (Andrews Charitable Trust) – is the principal shareholder of the Andrews & Partners estate agency such that ACT is wholly funded by the profits of the business. • Partly-funded venture philanthropy organisation. Such organisations are initiated by and partly funded, normally by one or more individual philanthropists, and therefore also devote some of the time and energy to fundraising. This seems to be the most common form of venture philanthropy organisation. Groups of philanthropists working collaboratively tend to want to attract more people into the group, and therefore tend not to fully fund a venture philanthropy organisation, but see it as pump priming a vehicle which can raise additional resources. Examples: Fondazione Oltre – a small group of individuals have provided the seed funding, and are raising additional funds from others. Fondation Phi Trust has its operating costs funded by the founding partners, and aims to raise additional funds from other sources. • Venture philanthropy-fund creation organisations. These are initiated by a person or organisation, who then raises funds or investments from individual philanthropists, institutions, and others. They may be initiated by: a specific nonprofit in order to raise funds for their own work; by a nonprofit to create a fund which in turn supports others (eg UnLtd Ventures; NESsT Venture Fund); a consortium of nonprofits to raise funds for common areas of work or to find additional means to pursue their mission. Examples: NESsT Venture Fund – raises funds, mainly from business and individuals, to support social enterprises in Central and Eastern Europe. UnLtd Ventures – is seeking to raise funds to support social entrepreneurs in the UK in their efforts to grow and expand their organisations. • Service provision and brokerage. This is a group of organisations which provide advice to philanthropists and support to nonprofits, and which invoke many of the same principles and practices of venture page 31

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philanthropy, such as very structured and high levels of engagement. They do not on the whole provide funding alongside the support, though they often broker and negotiate funding. A part of their service may even be to manage the grant-making activities of donors and philanthropists, including corporates and individuals. Examples: The Blue Link – brokers relationships between corporations and NGOs in developing countries to support the development of social enterprise and organisational capacity. WISE Partnership – provides in depth advice and support to philanthropists wanting to support nonprofits in transition economies.

Purpose and goals It was mentioned earlier that venture philanthropy tends to be focused on an organisational level of support, and there are many different ways in which this takes place in practice. For venture philanthropy in general, the means of achieving greater social benefits and impact is through supporting the development of stronger and more effective nonprofit organisations. •

Impetus has identified rebranding, mergers and turnaround (where the organisation has been very weak, and needs there is an opportunity for change) as strategies that might be adopted to increase organisational impact, along side growth and replication. In general terms they talk about supporting organisations through a ‘step-change’, and define success partly in terms of their ability to exit once such change has taken place and the organisation is stronger.

In many cases the criteria of only supporting registered or accredited charities or nonprofits is not relevant, and venture philanthropy tend to adopt an open and flexible approach in assessing which organisations are creating social value, and therefore which organisations they are interested in supporting. There may, however, be legal and tax reasons why it is preferable in certain countries to support only officially registered nonprofit organisations. Where?

Venture philanthropy tends to focus on domestic or local organisations (for example Pilotlight targets London based organisations), though there is a strong interest among some venture philanthropy in international development. Often the latter focus on domestic organisations that work internationally (for example in some of the work of Phi Trust, ACT), and occasionally on organisations that are indigenous to other countries (for example Social Venture Capital). Venture philanthropy lends itself most readily to in-depth and long-term engagement with organisations that are geographically close-by and therefore easily understandable and accessible. For some, however, it is in international development that venture philanthropy has the greatest potential impact.

What?

Many venture philanthropists are concerned with identifying organisations where their support will make the most difference, and therefore many do not focus on a particular social issue or area of need (for example Demeter and Impetus). There are, however, many exceptions to this, and several venture philanthropys have determined a field within which they specialise (for example the Canopus Foundation focuses on renewable energy; ARK carefully targets a range of issues including education and social exclusion in the UK, and HIV/AIDS in South Africa; the Partnership Foundation funds page 32

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organisations working with street children in India). In most cases the broad field is social welfare, rather than, for example, arts and culture, heritage, or animal welfare. Social enterprise is perhaps the most popular area of venture philanthropy support, and this could be because it offers a clear exit strategy in terms of self-generated income, as well as sharing much of the same language and mindset as in venture philanthropy, when compared with the nonprofit sector in general. How?

The focus on organisational development is often coupled with an interest in identifying social entrepreneurs as providing the kind of ambitious and imaginative leadership necessary for significant social impact. venture philanthropy often aims to support rapid organisational development, whether this is growth, replication, or ‘step change’. Individual social entrepreneurs may be seen as a necessary factor, and leadership and management development are often central to the focus on organisational growth or change. There may also be a more developmental purpose, where interventions are focused on catalysing change in existing organisations (for example the SHINE Academies, which are intended not to be sustained, but rather to create change in the schools and communities within which they are based).

Consistent with the overall approach of venture philanthropy, several venture philanthropy funds position themselves very carefully, carrying out detailed research into exactly where their funds can best be used. For example SHINE undertook careful investigations into finding a match between their interests and the needs, such that SHINE focuses on areas of education that are not well funded by government or currently addressed effectively by other means. Venture philanthropists are not necessarily only interested in easily definable needs, for example, ACT is interested in supporting ‘pre-popular’ causes, Impetus focuses on ‘unfashionable fields’ and NPC has worked to increase understanding of a number of complex social issues and the role of nonprofits. There is a tendency in venture philanthropy to focus on service provision, rather than, for example, campaigning, advocacy or research. This is consistent with the interest of venture philanthropy in being able to identify and measure clear performance improvements and impact, where it is often easier to assess directly the impact of services than advocacy. Having said that, venture philanthropy certainly does not preclude support for more politicised activities. For example in the work of the Sutton Trust which has commissioned research and engages in focused campaigns aiming to influence educational practice and policy. And the Canopus Foundation is actively seeking to raise awareness and understanding of social entrepreneurship within Germany.

Levels and forms of financial support Venture philanthropy is characterised by building deeper and longer term relationships with nonprofits. In fact, long term support is one of the mantras of venture philanthropy, though most have not been in existence long enough to demonstrate longer term support than provided by many grant making trusts and foundations. Many talk of support of around 3 or 5 years, which in general is not dramatically different from recognised good practice within the field of grant making, though it should also be acknowledged that many foundation and government grants are for one year, or are renewed on an annual basis. Perhaps more significant is the focus on project funding by most donors, where projects are conceived of as somehow time-limited or at least taking place over a number of distinct stages – though often

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projects are presented by nonprofits in this way to comply with donor requirements. This compares with the interest of venture philanthropy in enhancing organisational capacity and building sustainable organisations, implying that they are adopting a longer term perspective. Most venture philanthropists have not been active for long enough to give an accurate view of the length of the relationships being formed, though several do state an idea time period. • • •

NESsT provides grant support for 1 to 3 years, and in a few cases may extend support for a further year. Fondazione Oltre provides €15,000 to €60,000 over 2 to 3 years. Demeter provides €30,000 to €50,000 annually as a mix of loans and grants, for 3 to 7 years.

In practice venture philanthropy timescales are inextricably linked to the nature of the organisational development and outcomes sought, and the development of exit strategies. It may be more relevant for venture philanthropy to talk about timescales of support and engagement as being appropriate to the organisation and the desired outcomes, rather than as long-term per se. Also significant is the depth of the relationship, where venture philanthropy is often referred to as ‘high-engagement’ philanthropy. venture philanthropy funds have few organisations in their portfolio, and seek to create partnerships with them, rather than the more distant quarterly or annual written reports that donors tend to require. Relationships therefore do seem to be ‘deeper’, and this is discussed in more detail in the section following this one. Most venture philanthropy in Europe uses grants and occasionally loans, as the means of providing financial support (for example NESsT, which, even though it is supporting the development of social enterprise, provides grants to its investees, and does not expect any kind of financial return). But some venture funds are also developing alternative tools and means of financing, including shared equity and bonds. This positions some venture philanthropy organisations as part of a broader trend within nonprofit funding, which are developing and experimenting with a range of more sophisticated financial tools. Some of the ideas and thinking in this area has come out of practices and products available in private sector finance, though adapted and shaped to be suitable for the nonprofit world. • •

Media Development Loan Fund provides loans to support the emergence of independent media in transition countries. The loans are offered at below market interest rates and in packages suitable to the particular organisation. Venturesome is developing a range of financial tools which are then tailored to the needs of the organisation, aiming to recycle most of the funds it has raised. It currently provides pre-funding of fundraising to give more time to complete a fundraising campaign, working capital which can underpin cash flow, and development capital for organisational growth or project development.

Much of this development is about giving greater choice to donors and investors seeking to support social causes, as well as providing the most appropriate form of finance for the particular nonprofit organisations.

Levels and forms of engagement The depth of relationship and level of engagement that characterises venture philanthropy is best seen in terms of the transfer of expertise and the nature of the non-financial support provided. There is generally a detailed assessment process (often referred to as ‘due page 34

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diligence’) which takes place prior to the organisations being accepted into the venture philanthropy portfolio, which may be followed by a more in-depth and detailed organisational review. These processes result in agreement between the venture philanthropy and organisation as to the needs and priorities of the organisation. This then forms the basis for an agreement between the venture philanthropy and the organisation, which in some cases is a written document with specified targets and outcomes, very much like a contract. It is this very structured process, and the ritual of negotiating and agreeing the terms of the partnership, that distinguishes venture philanthropy. The process also involves considerable time commitment, and a willingness to open up and trust the venture philanthropy fund by the nonprofit organisation. Even where a nonprofit is not accepted in the portfolio, there is some evidence that the assessment and review process is a valuable experience, and certainly venture philanthropy funds seek to ensure that expectations are realistic. In some cases the venture philanthropy fund will take a place on the board of the nonprofit, as would be the case in venture capital, for example ACT. This establishes a sense of ownership and responsibility, and enables the venture philanthropy organisation to gain a deep understanding and involvement with the nonprofit. Most venture philanthropy organisations provide a mix of funding and expert support and advice. However some provide only expertise, though it is worth noting that this still requires funding and involves the transfer of resources, even if the expertise is provided on a pro bono or voluntary basis. •

•

•

Toolbox focuses entirely on the application of skills and expertise, and has chosen specifically not to develop a funding relationship with the nonprofits it supports. It is a membership association consisting of people interested in volunteering and making their expertise available. UnLtd Venture provides only expertise at present to certain of the ventures it supports, but is aiming to create a venture fund. In terms of the expertise it provides, it defines this in terms of numbers of expert hours committed, based on detailed organisational assessment and negotiation. And this is set out in writing as a contract between UnLtd and the supported group. Pilotlight matches the organisational needs of nonprofits to available skills and expertise of its members who are looking to provide voluntary assistance.

Where venture philanthropy organisations are providing funding alongside expertise, it is the financing mechanisms and fundraising that tend to be the earlier priority, and the systems for providing expertise which are developed later. For example, The Adventure Capital Fund, which focuses on social enterprise development, had not appreciated the level of support that would be needed by the organisations that they agreed to support financially. Expert advice and support is provided from a range of sources, accessed, managed and coordinated by the venture philanthropy fund. • • •

trustees, sometimes the venture philanthropists themselves (eg Impetus), though often they do not have the time to get so personally involved; staff, employed by the venture philanthropy organisation (eg UnLtd Ventures, Impetus); specialist consultants, both paid and pro bono, arising from close and in some cases exclusive links between a venture philanthropy organisation and a consultancy firm;

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•

volunteers, in most cases business professionals who give time on a regular basis or take a period of time out of their work (eg Toolbox, NESsT, ).

The sorts of issues which are likely to be a focus for support include: marketing; financial management and planning; fundraising strategy; leadership and management development; mentoring and coaching of senior management; governance and board development; growth strategies; systematising organisational policies, processes and procedures; social enterprise and income generating. In essence, many of these are areas of expertise which are well developed in business settings.

Monitoring, performance, impact, and exit A major aspect of the rationale for venture philanthropy is in achieving improved organisational performance and impact. Venture philanthropy organisations often say they want to achieve a ‘social return on investment’, mirroring the language of venture capitalists who are looking to achieve a financial return. As well as the distinction between financial and social, which is most often emphasised, another distinction is between who receives the benefit or return. Unlike venture capitalists, venture philanthropists are looking for benefits and returns which accrue to a variety of stakeholders, and not simply to themselves as the investors. Critical to this are assessment and evaluation systems. One example is the interest in ‘Social Return on Investment’ (SROI) and the European wide development and networking that is now being done on it, by EVPA amongst others. In addition, almost all venture philanthropy organisations are experimenting with and actively attempting to develop better performance management and impact evaluation tools for themselves. In many cases this involves assessment and evaluation of their own performance and impact, as well as of the investees. •

SHINE worked with the London School of Economics to achieve an independent and academically credible evaluation of their work and the organisations they were supporting, which was then used to refine their grant making and to focus on a more carefully selected group of organisations.

The difficulty in evaluating the impact of nonprofit organisations in a meaningful way is also recognised by the organisations that are attempting it – for example, SHINE is struggling with how it is possible to understand the impact of an educational intervention on a 7 year old, in terms of their development into adulthood and their future. Some are more concerned with adopting performance measurement systems as management tools, rather than systems that can provide accurate assessments of impact. In most cases it is accepted that a mix of quantitative and qualitative information is necessary – both numbers and stories. •

•

The Adventure Capital Fund uses an adapted version of the balanced scorecard, focusing on four areas: organisational development; business model; financial performance; social return. It is intended as a management tool to be used both on ‘a day to day basis and strategically’. NESsT has developed a performance management system, which reviews four areas: financial performance; social impact; financial sustainability; and organisational sustainability. The tool is intended to improve the management of organisations, and to demonstrate not only the increased capacity of the organisation, but also the impact of NESsT’s investment and support to the organisation.

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•

•

Toolbox assesses its impact by focusing on the extent to which objectives and goals agreed between Toolbox and the nonprofit organisations have been achieved. It does not seek to assess the social impact of the nonprofit organisation itself, as it sees this as one step removed from its focus on organisational development, and relies on its selection and assessment process to identify organisations that are doing significant work. Venturesome, similar to Toolbox, seeks to assess in what ways and to what extent it has helped the supported organisation become more effective. It emphasises the social impact of the organisation at the selection phase, and the impact of Venturesome’s investment and support in terms of the increased capacity of the organisation.

The development of exit strategies is also in the early stages of development. Most venture philanthropy has not been active for long enough to have built up a body of knowledge and understanding about successful exit. One exception to this is ACT, which was set up almost 50 years ago. Where it funds new start-up organisations, it does this for between 4 and 7 years at which point the organisations should be viable without the financial and expert assistance ACT provided. As such it would have established effective management and governance systems, as well as a reasonable funding stream, even if all future funding had not been identified. In the case of ACT exit is always preceded by a final evaluation report. Performance evaluation, impact measurement and exit are areas where many venture philanthropists are consciously trying to learn and share experiences, and where there is a significant potential relevance for a wide range of other funding bodies.

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Table 3: Venture Philanthropy Organisations in Europe This is a list of venture philanthropy organisations with which EVPA is familiar, as of November 2005. Consistent with EVPA’s broad definition of venture philanthropy, together with its aim to engage with the field as a whole, some of those listed below are philanthropic organisations whilst others offer support, advisory and brokerage services. This is not a comprehensive list, and at this early stage in the development of venture philanthropy in Europe there are doubtless other organisations operating with some or all of the principles of venture philanthropy. Country

Activities and forms of engagement

Focus of support

Provides money

Provides expertise

Field

International/ Domestic

Website

Comments

Membership based association.

Toolbox

Belgium

No

Yes

Any

Domestic

www.toolboxh 2o.org

Media Development Loan Fund

Czech Rep.

Yes. Loans, repayment terms over 4-7 years.

Yes

Independent media

International

www.mdlf.cz

TCF (The Charity Foundation)

Estonia

Yes

Yes

Social entrepreneurshi p

Domestic

Fondation PhiTrust

France

Yes. 3-5 years.

Yes

Social, cultural and environmental.

International (NGOs based in France)

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www.phitrust.c om

Linked with PhiTrust Finance, which focuses on socially responsible investment.

Venture Philanthropy in Europe

Country

Activities and forms of engagement

Focus of support

Provides money

Provides expertise

Field

International/ Domestic

Website

Comments

Goal is capital preservation in real terms for the fund and foundation.

Demeter

France

Yes. Grants and loans, over 5 to 7 years.

Yes

Including microfinance

International

BonVenture

Germany

Yes. Grants, equity, mezzanine financing, loans etc €100-€500k over 3-7 years

Yes

Social, ecological.

Domestic

www.bonventu re.de

Canopus Foundation

Germany

Yes

Yes

Energy, environment, social entrepreneurs.

International (some domestic)

www.canopusf und.org

NESsT

Hungary

Yes. Grants, over 1-3 years.

Yes

Social enterprise

International

www.nesst.org

Also operates in Latin America.

The One Foundation

Ireland

Yes

Yes

Youth, mental health, early stage social entrepreneurs, Vietnam.

Domestic / International

www.onefoun dation.ie

Aims to spend down over 10 years. Strategic partnership with New Profit Inc, USA

Fondazione Dynamo

Italy

Yes, in some cases

Yes

Social entrepreneurship

Domestic / International

www.fondazione dynamo.org

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Venture Philanthropy in Europe

Country

Activities and forms of engagement

Focus of support

Provides money

Provides expertise

Field

International/ Domestic

Website

Comments

Fondazione Oltre

Italy

Yes. Grants, €15-€60k for 23 years

Yes

Social

Domestic

www.fondazio neoltre.org

Noaber

Netherlands

Yes

Yes

Digital technology

International

www.noaber.c om

Partnership Foundation

Netherlands

Yes

Yes

Street children

International

www.partnersh ipfoundation.nl

Sole focus on street children in India

Social Venture Capital

Netherlands

Yes

Yes

Poverty reduction

International (Ghana, Morocco, Sth Africa)

www.sovec.nl

Venture capital fund and charitable foundation operate in parallel

The Blue Link

Netherlands

No

Yes

Development support, social enterprise.

International

www.theblueli nk.org

Brokers corporatenonprofit relationships

WISE Partnership

Switzerland

No

Yes

Development support.

International

www.wise.net

Brokers philanthropist nonprofit relationships.

MyImpact

Switzerland

No

Yes

Awareness raising and brokering relationships

International

www.myimpac t.ch

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Country

Activities and forms of engagement

Focus of support

Provides money

Provides expertise

Field

International/ Domestic

Yes

UK – social welfare

Domestic

Website

Comments

www.aglimmer ofhope.org

Part of a US based initiative showing some characteristics of VP.

A Glimmer of Hope

UK office (of US based foundation)

Yes. Grants

ACT

UK

Yes

Yes

Poverty and others who are marginalised.

Domestic / International

www.andrews charitabletrust. org.uk

Established in 1965 by a business entrepreneur and linked to a UK firm of estate agents.

ARK

UK

Yes. Grants

Yes

Children/ youth Also research

Domestic / International

www.arkonline .org

Founders have Hedge Fund industry background.

Funding Network

UK

Yes. Grants

No

Human rights, environment, health, education, conflict resolution

International / Some domestic

www.fundingn etwork.org.uk

Brings together new philanthropists. Some characteristics of VP.

Impetus

UK

Yes. Grants, £100-£500k, 3-5 years

Yes

Social.

Domestic

www.impetus. org.uk

(US foundation works in US and Ethiopia)

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Country

Activities and forms of engagement

Focus of support

Provides money

Provides expertise

Field

International/ Domestic

Website

Comments

New Philanthropy Capital

UK

No

Advice / support to donors.

Research and advisory services.

Domestic / International

www.philanthr opycapital.org

Advisory service for VP funds.

Pilotlight

UK

No

Yes

Marches corporate volunteers with charities.

Domestic

www.pilotlight. org.uk

Some characteristics of VP.

SHINE

UK

Yes

Yes

Education

Domestic

www.shinetrus t.org.uk

The Sutton Trust

UK

Yes

No

Education

Domestic

www.suttontru st.com

Some characteristics of VP

UnLtd Ventures

UK

No. Planning a fund in the future.

Yes

Social entrepreneurs.

Domestic

www.unltd.org .uk

Part of UnLtd – UK foundation for social entrepreneurs

Some advisory, especially before investment made

Social

Domestic

www.ventures ome.org

Aims to recycle funds invested.

Currently brokers third party funders Venturesome

UK

Yes. Financing in the form of loans, equity investment etc, £20k-£150k.

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5. Obstacles and opportunities This section considers in more detail the issues experienced by and facing venture philanthropy in Europe. The idea is to set out more explicitly the limits and challenges, as well as the potential and opportunities, for development of the field of venture philanthropy in Europe. It is not possible to address the each country and the specific cultures and regulations that may affect the development of venture philanthropy. The points made and issues raised are therefore often more general.

Locating the European version of venture philanthropy Venture philanthropy can be located as bridging the worlds of venture capital and philanthropy, and at the same time engaged with nonprofits more broadly and reaching into government. This is a complex set of relationships, and very different worlds to get to know and understand, yet this is exactly where much of the strength and value of venture philanthropy lies. The development of venture philanthropy in Europe is similar to what is already known about and characterises venture philanthropy in its original US incarnation: venture philanthropy funds in Europe also focus on nonprofit organisational capacity and enhancing social impact by providing a mix of funding and expertise through an engaged relationship or partnership between investor and investee. There are also some notable differences. In terms of the broad context of philanthropy, Europe has not seen quite the same level of interest in other developments in philanthropy that have been more prominent in the US, such as social justice philanthropy, social investment, strategic philanthropy and effective philanthropy. Philanthropic practice in Europe could benefit from some of these discussions and learning about a wider range of alternative approaches. Venture philanthropy may be a means through which these debates can take place, especially as they are likely to involve some overlap in interest, and yet also provide opportunities to engage more broadly. Venture philanthropy in Europe is more explicitly experimental and humble than when it first appeared in the US, and perhaps more akin to how it is now taking shape in the US than during its early days. It has therefore not provoked the same level of antagonism and the heady debates, but rather more informed and considered discussions and developments are taking place across a wide range of donors, including long established grant making foundations as well as some government departments. Another distinction is that governments play a larger part in taking responsibility for and meeting social needs in Europe. Similarly, attitudes to government in Europe are less hostile than is often the case in the US. This affects the sort of fields that venture philanthropys target. It means that venture philanthropy in Europe is more readily able to support ‘pre-popular’ and ‘unfashionable’ causes, rather than what could be considered more mainstream poverty alleviation and economic development. There is, furthermore, a greater tendency for venture philanthropy in Europe to be working internationally than in the USv. Within the UK, government has even adopted some venture philanthropy-like approaches in setting up new funds for supporting nonprofits (such as Futurebuilders).

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Obstacles and limits There are a number of challenges or obstacles to venture philanthropy and its development in Europe. Some of these relate to the context and obstacles that exist external to venture philanthropy itself but within the arena where it operates; others are about some of the inherent characteristics of venture philanthropy and the way in which it has developed to date. (i) Words and names The very name ‘venture philanthropy’ has both attracted and alienated people, and is viewed as exciting by some, and as unsuitable by others. The term ‘venture’ creates a link with the venture capital world, and this is valuable for those promoting venture philanthropy. But for some people it is too strongly associated with high risk taking to be appropriate for social causes. Similarly, the term ‘philanthropy’ in Europe has negative connotations of patronage and elitism. From that point of view ‘philanthropy’ is used very differently to the way in which it is used in the US, where it has generally positive associations. There is some move towards referring to ‘high engagement giving’, and this may be a more inclusive term, but does not capture the distinctive inspiration taken from venture capital. If developments in the UK are anything to go by, then it may be that ‘philanthropy’ will shift from its negative reputation to a more positive one, and somehow be revisited and reclaimed, drawing on the original notions of civic action and ‘love of mankind’ together with more contemporary notions of professionalism and engagement. Whilst many donors may view the notion of ‘philanthropy’ as old fashioned, in fact many donor practices are far from progressive. Even when successful business people become involved in grant making, they often leave much of what they would consider rigorous and effective business practices behind them. Giving is more of a personal and emotional expression, and at times can be approached more like a hobby than a pursuit which requires strategic and informed thinking. This is a significant barrier for those wanting to promote and engage donors in venture philanthropy. Many donors want to remain private and much giving is done discreetly and confidentially, especially when compared with practices in the US where donors tend to want recognition and a high profile. Venture philanthropy in particular is seen as a ‘flag waving’ form of philanthropy that specifically looks to gain a high profile in order to establish its agenda and promote its practices. This may alienate some potential donors who would otherwise consider adopting a venture philanthropy approach. In practice, however, venture philanthropy organisations do not engage with personal flag waving, and employ professionals to lead and manage the organisation. So in some ways this is a problem of perception rather than practice, but is nevertheless important if venture philanthropy is to attract a wider range of supporters. In some cases philanthropists are practising ‘venture philanthropy’ but are reluctant to use the term, and this may limit the learning and sharing of experiences as the field develops. In general the information available for potential individual donors is limited and often inaccessible. For venture philanthropy to flourish, there also needs to be better infrastructure for grant making and better signposting for donors in general. Along with this, more donor services are required that provide the sort of expert advice and information that donors, often with limited experience and exposure to the nonprofit field, can trust and understand.

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(ii) The nonprofit sector Nonprofits organisations are relatively inexperienced in partnering and in managing high engagement relationships and consultancy services. It may even be that those organisations that are least able to take advantage of what venture philanthropy offers, are those most in need. This is not helped by the fact that to date there is little published material and shared information between nonprofits about their experiences of venture philanthropy, and most information is published by the venture philanthropy organisations themselves. (iii) The venture philanthropy model There are of course limits to the applicability of the venture philanthropy model, and there are certainly no claims that it should supplant other forms of giving. There are, nevertheless, a couple of specific issues that need to be anticipated and addressed within venture philanthropy if it is to develop. The first is achieving successful exit from supporting the nonprofit. Most venture philanthropy funds are too young to be able to assess whether they do successfully manage the exiting of nonprofit organisations from their portfolio. Experience from the US indicates that exit may be harder than was at first thought, though ACT, as the longest established venture philanthropy fund in the UK, has a good track record of successful exit, having provided early stage support to organisations which are now large and well recognised, such as Oxfam and Action Aid. The second is cost – both of venture philanthropy itself and of the positive social impact that it seeks to create. At the moment the operational costs of many venture philanthropy funds are fully or partly covered by earmarked or targeted donations, often from founding philanthropists, at other times from other supporters. Sometimes initial development support for the venture philanthropy fund is provided pro bono by a management consultancy. This means that additional donors to these funds are presented with the attractive opportunity of directing their support wholly to the cause. There may always be donors wanting to support administration and operating costs, which would free up other donors to fund just the grants and support elements. However this is not a model which allows for easy understanding of how much it costs to implement venture philanthropy or forms of engaged grant making and support. This is an important issue, partly because so many donors do not want to ‘waste’ their money on administration and want to see their funds go directly to those in need – and this is part of the reason why it has been so difficult to raise funding for the organisations costs of nonprofits, a central part of the rationale for venture philanthropy in the first place. In terms of the support provided to the nonprofit organisations and the social impact sought, there is a similar issue. Much of the expertise and consultancy type support is provided on a voluntary basis by individuals or on a pro bono basis by commercial management and other consultants. Again, this does not produce easily accessible information about how much it costs to provide quality and effective support to develop nonprofit organisations. The central issue here is that venture philanthropy may be continuing the existing practice whereby it is assumed that nonprofits can access the expertise they need for free, therefore giving the impression that social development and social change can take place at minimum cost. In both cases the issue is very similar, in that it does not open up the debate about how much we need to be paying, as individuals and as a society, for the kind of social development that we want to see take place. It may also bring into question in the future the cost effectiveness page 46

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of venture philanthropy, and support the on-going reluctance of donors to fund organisational costs.

Opportunities and potential In an earlier section the potential of venture philanthropy in general was identified in terms of four main areas, and these are revisited and discussed with reference to the European context. (i) Bringing new money, resources and expertise to the nonprofit sector. Given the still very small number of venture philanthropy funds in Europe, to date venture philanthropy has not brought in significant amounts of new resources to the nonprofit sector in Europe. Certainly philanthropy is growing anyway, and it is unlikely that venture philanthropy is attracting money and resources which otherwise would not be coming into the sector. Venture philanthropy is popular with a particular type of funder – people with a background in finance, investment, and venture capital, who are looking for a suitable philanthropic approach and vehicle, and venture philanthropy provides an accessible and familiar language and mentality. In fact most new donors are not adopting a venture philanthropy approach. Having said that, there is certainly potential for bringing in new funds and resources, particularly as many venture philanthropy funds are actively fundraising. It is notable that some venture philanthropy organisations have raised some of their funding from existing grant making foundations, and whilst this may be entirely fitting and an effective use of grants, it is also important to recognise that such funds are not new to the field. Another way in which funding is drawn in is through high prestige events, and these may be bringing in money that otherwise would not be donated. Such events seem to have been effective in raising the profile of venture philanthropy and the causes they support with a range of existing and potential big gift donors. It would also be interesting to know if any were then attracted to become more involved as actual venture philanthropists or in also giving their time and expertise. In fact the voluntary effort and pro bono support which venture philanthropy funds are attracting and managing is striking. This is often done in novel ways that better ensure that both the nonprofits and those providing the support benefit from the relationship. It is probably easier to say that new expertise and support have been brought to the nonprofit sector through venture philanthropy than to conclude than new money has been made available. Another aspect of venture philanthropy that could support the emergence of new supporters, is the collaborative and social style that is often adopted. Venture philanthropy funds are rarely established by single donors, and are more often a part of a collective effort, which may in turn be significant in creating a culture of giving within a particular peer group. The idea that donors and supporters are in partnership with one another is a powerful one, and may potentially be one of the most significant innovations of venture philanthropy. It also represents a shift away from the more traditional large scale philanthropy is so often associated with a named individual seeking to leave a legacy or a mark on the world. Underpinning this is the idea of partnership, rather than the one way transfer of skills, funds and expertise which has so dominated the donor-grantee relationship. The sorts of relationships and engagement that venture philanthropy is creating are challenging and breaking down the traditional barriers between the nonprofit, private and public sectors. page 47

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There is an increasing ability to engage across the sector boundaries, through experience and the development of a common language. There is also an increasing ability to recognise the skills and value within each sector, and to extract and adapt the specific techniques and practices that may be useful and relevant in a different context. For nonprofits this means more effective use of some of the tools that have been developed over long periods and with much investment in the private sector, such as marketing and financial planning. So the transfer of new resources into the nonprofit sector is not just about money and voluntary effort, but rather about a changing relationship between sectors that could is certainly supported by the work of venture philanthropy taking place at the organisational level. (ii) Influencing existing donors to improve grant making practices, and specifically to focus more on effectiveness, impact and organisational development. In many European countries existing donors have been slow to respond to the oft stated need amongst nonprofits for core organisational funding. There is some evidence that this is starting to change in the UK, especially with the recent establishment of the Futurebuilders Fund, which focuses on building nonprofit organisational capacity. Whilst it would be difficult to credit venture philanthropy alone for this, it is certainly the case that policies on funding organisational costs and capacity are starting to be taken more seriously in the UK. For some the most significant potential of venture philanthropy is not just in influencing the practices of grant making foundations, which after all play a small role in terms of amounts of funding in Europe, but rather to influence government practices. The ways in which both central and local governments contract with and partner with nonprofits could be changed such that there is greater recognition of the need for strong and expert nonprofit organisations, and not to focus solely on specific services and delivery. As yet, there are few signs that government is thinking in this way within continental Europe. And in many countries the situation is more complex given the more entangled relationship between the state and nonprofits when compared with the value placed in the UK on an independent sector. In this sense, the development of a European level of nonprofit activity may be an important way in which nonprofits can develop alternative structures and also lobby for changes at the national level, especially where the state is very restrictive or controlling of the sector (iii) Creating new types of relationship between nonprofits and their supporters. Venture philanthropy organisations in Europe all look and act very differently. Often they have developed unique models of how to provide support and funding, even where they have taken inspiration and ideas from existing venture philanthropy initiatives in the US or from other fields. This is clearly an area where development is currently taking place, and where there is progress, even if it is currently not very visible. The development of a greater variety of distinct ways in which nonprofits are financed is indicative of a maturing of the sector as a whole, as well as a concern by philanthropists and donors that their money is used to best effect. As these models develop and are refined, they need to be made available to existing and potential philanthropists. Many of the venture philanthropy funds in the US have set a good role model, in publishing detailed information about their work and in sharing openly how they operate. And many philanthropists find it difficult to identify useful and up to date information about the different approaches that exist. This is not about detailed legal and tax

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advice, but rather about having a vision for what you want to create through philanthropy, and being able then to assess the different models that might be appropriate. (iv) Improving the impact and effectiveness of ‘investee’ nonprofit organisations Timescales have not been long enough to judge whether nonprofit organisations have become more effective and achieved greater impact. However, if ACT is considered to be a kind of proto-venture philanthropy fund, there is certainly evidence that a high level of engagement can support the development of large, high profile and successful nonprofit organisations. It is on the measurement and assessment of performance and impact that venture philanthropy has focused much effort: from the initial assessment and due diligence process that is used to select potential nonprofit partners, to the development of performance management and impact assessment tools.

6. Conclusions Venture philanthropy is a very timely development given the types of changes taking place in the nonprofit sectors and the field of philanthropy across Europe. Venture philanthropy offers a new language and vehicle for philanthropists who are looking to develop closer relationships with nonprofit organisations as a way of channelling their energies and interest in sparking social change. And for nonprofit organisations, venture philanthropy is responding to the oft discussed need for organisational development, core skills, and more sophisticated and flexible financing. Europe has seen a rapid development in venture philanthropy, with an impressive variety of different organisations, creating a rich and diverse new field. Equally, the momentum needs to be sustained, and careful attention needs to be paid to the limitations and obstacles facing venture philanthropy. In particular, the potential impact of venture philanthropy depends on the amounts of money and expertise it can gather, as well as the numbers of people and organisations who enter the field. It also depends on the ability of venture philanthropists to communicate its value and to demonstrate its worth and cost-effectiveness.

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Bibliography and suggestions for further information Venture Philanthropy: Articles Billiteri, Thomas J. (2000) Venturing a Bet on Giving. The Chronicle of Philanthropy, Thursday, June 1. *Brodie, Judith (2004) Rise of Venture Philanthropy. The Guardian Society, Wednesday, November 10. Capers, Christopher, Collins, Michael and Gooneratne, Shahna (1998) Assessing Venture Philanthropy. Paper prepared for Harvard Business School Professor James Austin, Entrepreneurship in the Social Sector. Downloaded on 25 May, 2005, at http://pages.prodigy.net/michael_collins/venture philanthropy/venture philanthropy.htm *Carrington, David (2003) Venture Philanthropy: A new concept or an old idea re-wrapped? Speech given at ACF Conference, Nottingham, 9 April. Colvin, Geofffrey (2001) The Gift of Arrogance, Fortune (Europe), Volume 144, Issue 12. Coote, Anna (2001) The rich take to a new style of giving, New Statesman, 16 April. *Drucker, H.M. (2000) Wanted: UK Venture Philanthropists, Oxford Philanthropic, 4 February. Edelson, Harry (2004) Philanthropic Venture Capital: Its Time Has Come, Venture Capital Journal, January. *Etchart, Nicole and Davis, Lee (2002) Prophets for Non-profits? Alliance, Volume 2, No. 2, pp4-7. Frumkin, Peter (2003) Inside Venture Philanthropy, Society, May/June, pp7-15. Gose, Ben (2003) A Revolution was Ventured, but What Did It Gain? Chronicle of Philanthropy, August 21. Hanshaw, Margaret (2000) Venture Philanthropist, Harvard Business Review, July-August. Letts, Christine W., Ryan, William, and Grossman, Allen (1997) Virtuous Capital: What Foundations Can Learn from Venture Capitalists, Harvard Business Review, MarchApril. *Lloyd, Theresa (2002) Venture Philanthropy, Philanthropy UK. *Pepin, John (2004) Venture Capitalists and Entrepreneurs Become Venture Philanthropists, John Pepin and Associates Ltd. Scanlan, Eugene A. (1999) The fifth way: The new corporate philanthropy at the millennium, New Directions for Philanthropic Fundraising, No 26, Winter. Scott, Jason A. New Economy, New Philanthropy. Published by the National Committee for Responsive Philanthropy. Sievers, Bruce (1997) If Pigs had Wings, Foundation News and Commentary, November/ December. Skloot, Edward (2000) The Promise of Venture Philanthropy, Keynote address at the Sixth Annual Nonprofit Executive Series: Building the Entrepreneurial Nonprofit, Town Hall, Seattle, WA, April 2000. In its original form the talk was entitled ‘Nonprofit

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Entrepreneurialism: The Good, the Bad, and the Inescapable’. Downloaded on 25 May, 2005, at http://www.surdna.org/venture.html Tranquada, Warren and Pepin, John (2005) Good Results Will Be Addictive, John Pepin and Associates, March. Van Doorselaer, Sean (2004) Venture Capital for Social Enterprise, MakingWaves, Volume 15, No. 3. Wagner, Lilya (2002) The ‘new’ donor: Creation of evolution? International Journal of Nonprofit and Voluntary Sector Marketing, Volume 7, No. 4, pp343-352. [* indicates articles which are specifically about venture philanthropy in the UK or Europe more broadly] Nonprofit organisations and foundations: Books and articles Anheier, Helmut K. (2002) The third sector in Europe: Five theses, Civil Society Working Paper 12, Centre for Civil Society, London School of Economics and Political Science. Archambault, Edith (2001) Historical Roots of the Nonprofit Sector in France, Nonprofit and Voluntary Sector Quarterly, Volume 30, No. 2, June, pp 204-220. Bode, Ingo (2003) Flexible Response in Changing Environments: The German Third Sector Model in Transition, Nonprofit and Voluntary Sector Quarterly, Volume 32, No. 2, June, pp 190-210. Burger, Ary and Veldheer, Vic (2001) The Growth of the Nonprofit Sector in the Netherlands, Nonprofit and Voluntary Sector Quarterly, Volume 30, No. 2, June, pp 221-246. EFC (European Foundation Centre) (1999) European Foundation Fundamentals. Fulton, Katherine and Blau, Andrew (2005) Looking Out for the Futue. Executive Summary. An Orientation for Twenty-First Century Philanthropists, Global Business Network and Monitor Institute. Hammack, David C. (2001) Introduction: Growth, Transformation, and Quiet Revolution in the Nonprofit Sector Over Two Centuries, Nonprofit and Voluntary Sector Quarterly, Volume 30, No. 2, June, pp 157-173. Johnson, Paula D., Johnson, Stephen P., and Kingman, Andrew (2004) Promoting Philanthropy: Global Challenges and Approaches, Bertelmann Stiftung, International Network on Strategic Philanthropy. Laville, Jean-Louis and Nyssens, Marthe (2000) Solidarity-Based Third Sector Organizations in the “Proximity Services” Field: A European Francophone Perspective, Voluntas, Volume 11, No. 1. Leat, Diana (1992) Trusts in Transition: The policy and practice of grant-giving trusts. York: Joseph Rowntree Foundation. Meijs, Lucas C.P.M. (2004) Changing the Welfare Mix: Going from a corporatist to a liberal non-profit regime, Paper presented at ISTR Sixth International Conference, Toronto, Canada, July 11-14. Ostrower, Francie (2004) Attitudes and Practice Concerning Effective Philanthropy, The Urban Institute, Center on Nonprofits and Philanthropy. page 51

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Ostrower, Francie (2004) Foundations Effectiveness. Definitions and Challenges, The Urban Institute, Center on Nonprofits and Philanthropy. Salamon, Lester M, Sokolowski, S. Wojciech and List, Regina (2003) Global Civil Society: An Overview, The Johns Hopkins Comparative Nonprofit Sector Project. Baltimore: The Johns Hopkins Centre for Civil Society Studies. Salamon, Lester M. and Anheier, Helmut K. (1996) The Nonprofit Sector: A New Global Force, Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, no. 21, edited by Lester M. Salamon and Helmut K. Anheier. Baltimore: The Johns Hopkins Institute for Policy Studies, 1996. Salamon, Lester M., Anheier, Helmut K., Regina List, Toepler, Stefan, Sokolowski, S. Wojciech, and Associates (1999) Global Civil Society: Dimensions of the Nonprofit Sector, The Johns Hopkins Comparative Nonprofit Sector Project. Baltimore: The Johns Hopkins Centre for Civil Society Studies. Salamon, Lester M., Sokolowski, S. Wojciech and Anheier, Helmut K. (2000) Social Origins of Civil Society: An Overview, Working Papers of The Johns Hopkins Comparative Nonprofit Sector Project, no. 38, edited by Lester M. Salamon and Helmut K. Anheier. Baltimore: The Johns Hopkins Centre for Civil Society Studies. Schlüter, Andreas, Then, Volker and Walkenhorst, Peter (2001) Foundation in Europe. International Reference Book on Society, Management, and Law. Bertelsmann Foundation. Thomas, Antonio (2004) The Rise of Social Cooperatives in Italy, Voluntas, Volume 15, No. 3. Zimmer, Annette (1999) Corporatism Revisited – The Legacy of History and the German Nonprofit Sector, Voluntas, Volume 10, No. 1. US Venture Philanthropy Organisation Reports Many US venture philanthropy organisations publish a variety of reports in order to share their learning. The four organisations listed below are a good starting point for finding out about US experiences. Acumen Fund New Profit Inc. Social Venture Partners Venture Philanthropy Partners

http://www.acumenfund.org/News/Publications/ http://www.newprofit.com/learn.asp http://www.svpseattle.org/key_documents/default.htm http://venturephilanthropypartners.org/learning/index.html

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Appendices A. Research brief, methods and process Introduction This draft proposal about venture philanthropy in Europe has been drawn up following telephone conversations between Paola Grenier, LSE, and Doug Miller, EVPA. This draft is intended to prompt further and more detailed discussion about the proposed research, with a view to drawing up a final proposal which will be presented to an EVPA meeting on 1 December in Amsterdam. It is hoped that the Amsterdam meeting will provide an opportunity to inform people interested in venture philanthropy in Europe about the research, to engage with them and get input and feedback, and potentially to develop some partnerships and collaborative arrangements. Background Venture philanthropy is a new and emerging form of philanthropy which is probably best established in the USA. On its website EVPA characterises venture philanthropy as: • • • •

The active partnership, or engagement, of donors, volunteers and/or experts with charities to achieve agreed outcomes such as organisational effectiveness, capacity building or other important change; The use of a variety of financing techniques in addition to grants, such as multi-year financing, loans or other financial instruments most appropriate for a charity's needs; The capability to provide skills and/or hands-on resources with the objective of adding value to the development of a charity; The desire to enable donors to maximise the social return on their investment whether that be as a financial donor or as a volunteer of time and expertise.

There are examples of venture philanthropy organisations in several European countries, but there is very limited experience to date, and few organisations with any kind of a substantial track record. It is also a form of philanthropy that is relatively unfamiliar to nonprofit and voluntary organisations, which are more used to managing grant and contract relationships than venture relationships. Having said that, there are many existing philanthropic organisations which do adopt some of the approaches characterising venture philanthropy, without necessarily using the same terminology. Some do so as a part of existing organisational commitments to good practice; others have been drawn to approaches such as ‘effective philanthropy’, ‘strategic philanthropy’, and ‘engaged philanthropy’. Purpose and questions The purpose of the research is to scope the field of venture philanthropy throughout Europe in order to provide some guidance for EVPA in developing its services, plans and priorities for the next few years. In particular the research aims at identify some of the key opportunities and challenges for venture philanthropy at the European level. It is also hoped that the report will raise awareness and understanding of venture philanthropy and EVPA’s role. The research aims to answer the following three questions:

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•

What are the levels and forms of venture philanthropy in Europe? Within this question there are a number of issues which need to be addressed. In particular to identify: • examples of venture philanthropy which EVPA is not currently aware of; • who is involved in venture philanthropy and in what way, and who is interested in it; • what are the perceived benefits of venture philanthropy; • what legal forms exist and are being adopted; • what tax incentives exist Because of the limited field of venture philanthropy, many of these questions are more likely to be explored through cases rather than through surveys. •

What are the key issues facing the development of venture philanthropy in Europe? In some ways this is the heart of this research, attempting to identify what opportunities exist, and what challenges and obstacles there are.

•

What support and advisory services exist, and who is providing them? In terms of advising on legal form, tax status, and good philanthropic practices.

Research approach, boundaries and focus The research will cover Europe. There is not the capacity to undertake original research in each country, and therefore the work needs to be focused carefully. Below is a list of countries within the EU and in Western Europe which are likely to be included.

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Austria Belgium Czech Republic Denmark Finland France Germany

Greece Hungary Italy Netherlands Norway Poland Portugal

Rep. of Ireland Slovakia Slovenia Spain Sweden Switzerland United Kingdom

As noted earlier there is not the capacity to undertake detailed primary research in each country, and this is probably not appropriate given that we know there is limited activity involving venture philanthropy at present. The research strategy therefore is: • • • •

to draw on the networks accessible through EVPA either to provide information and data on venture philanthropy directly, or to provide further contacts to people who may have information and an interest in the field; to make use of published materials as much as possible, though this is likely to be limited given that there is limited research on philanthropy let alone venture philanthropy; to use a case study approach to describe the work of a selected number of venture philanthropists in different countries; to focus on those countries where there are contacts and potential, and envisage drawing in other countries in the future.

Stages of research Preliminary work Some preparation work is needed in terms of: • developing an operational definition of venture philanthropy, which may alter during the research, but is a starting point for focusing the field; • gaining support and input from EVPA members; • identifying potential partners and collaborators in the different countries, and drawing them into the research • refining the proposal and presentation to EVPA on 1 December. Stage 1: Literature review Review existing research on philanthropy in Europe, and summarise current knowledge of venture philanthropy and other forms of ‘effective’ philanthropy. In particular summarise: • legal and tax position • trends in philanthropic foundations and their activities • levels of interest and activity in venture philanthropy or closely related philanthropic activities. This is likely to be based on: • input from specialist and umbrella organisations, for example European Foundation Centre; • recent research undertaken at LSE on a) the Visions and Roles of Foundation in Europe, and b) the policy significance of the EU for nonprofits; • other research which may be significant.

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Stage 2: Field work and data collection The first element of the research will be to work with EVPA contacts and networks and identify those who can directly provide information and who are willing to help and contribute to the research. From this the research will involve what researchers call ‘snowballing’, involving starting with a few (or even one person) people in each country and learning about who else is relevant and would be worth approaching from them. Data would be gathered through: interviews in written form directly from partners and contacts (this will probably involve developing a brief or pro forma for the information required) questionnaires, if appropriate A lot will depend on how much information is also available and how much EVPA contacts can contribute in the early stages of the research. Certainly it could start in the UK, and this could act as a starting point for identifying some issues which could then inform the work in other countries. So the work could be rolled out from the countries where we have better knowledge. Thought will be need to given to language and translations. Stage 3: Report writing Following data collection, analysis and report writing will take place to ensure that the report meets EVPA’s expectations. This will involve providing EVPA with a draft outline, and with opportunities to comment on and input into full drafts prior to delivery of the final product. Deliverables 1. Presentation at EVPA meeting on 1 December, Amsterdam. 2. A final report which will be presented to the EVPA Conference in June 2005. The report will be about 30-40 side of A4 (which is roughly 20,000 words). It will include an executive summary and recommendations, as well as the main report findings. Consideration would be given to translating some of the materials.

B. List of those interviewed and consulted Name

Organisation

Country

Kurt Peleman Martine Godefried Lee Davis and Nicole Etchart Triona Keaveney Anne-Claire Pache François d’Ormesson Olivier de Guerre Eric Archambeau Éva Varga Sean Coughlan Alex Gusella

Toolbox Consultant NESsT European Foundation Centre INSEAD Phi Trust Phi Trust Venture capitalist NESsT The One Foundation Fondazione Dynamo

Belgium Belgium/Europe Chile/CEE Europe France France France France Hungary/CEE Ireland Italy

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Luciano Balbo Edward Nieuwenhuijz Kruseman Ferd can Koolwijk Michiel de Haan Jacco Brink Joachim Westerveld Peter Scholten Chris Carnie Virginia Klamon Etienne Eichenberger Ray Sheath Jon Fitzmaurice Francesca Jones John Pepin Judith Brodie Nick Rogers Stephen Shields Peter Kenyon John Kingston

Fondazione Oltre Consultant Partnership Foundation SOVEC The Blue Link The Blue Link Consultant Consultant SVP International WISE partnership Adventure Capital Fund Agents for Change Andrews Charitable Trust (ACT) Consultant Impetus Trust North Down Borough Council SHINE UnLtd Ventures Venturesome

Italy Netherlands Netherlands Netherlands Netherlands Netherlands Netherlands/Europe Spain/UK/Europe Switzerland Switzerland UK UK UK UK UK UK UK UK UK

This report was also informed by the EVPA conference held in Amsterdam, on 1 December 2004.

i

The term ‘nonprofit’ is used (fairly) consistently throughout this report, and is intended to encompass the charitable and voluntary sectors of the UK, and other notions that are also commonly applied, such as third sector, independent sector, non-governmental organisations (NGOs), civil society organisations, citizen organisations, social sector. Even though each may have slightly different emphases and connotations in different countries and contexts, it is not the intention here to draw attention to these differences, but rather to use a term which is broad and generically applicable. Nonprofit is intended to mean: private, organised (as opposed to very informal), voluntary (ie non-coercive), self-governing, non-profit distributing, serving a common or public benefit (see Salamon, Sokolowski & Anheier, 2000). ii The King Baudoiun Foundation in Belgium has been actively promoting and facilitating cross-border giving within Eureo – see www.givingineurope.org. iii Examples of venture philanthropy organisations which ceased operating include: • The Entrepreneurs Foundation, which briefly used stock options donated by start-up companies to make venture grants, but its revenue dried up when the number of Initial Public Offerings (IPOs) decreased in 2003. • The Silicon Valley Foundation made three grants before abandoning its venture fund and shifting to advising companies on corporate philanthropy. • The Flatiron Foundation, made only a handful of grants before the company that sponsored it, a venture capital fund impacted negatively by the declining stock market, decided to cease new grant making in 2001. • The Innovation Fund, started by the James Irvine Foundation in 2000 to form partnerships between non-profit groups and businesses, lasted just one year.

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iv

In a report looking to the future of venture philanthropy, John Pepin (2005) refers to the Shell Foundation and Diageo’s Corporate Citizenship Initiative as “venture philanthropy-like organisations”, as well as the UK government funded Futurebuilders programme. v A survey conducted by Community Wealth Ventures Inc. published in ‘Venture Philanthropy 2002. Advancing Nonprofit Performance Through High-Engagement Grantmaking’ profiled 42 venture philanthropy organisations. Of those, 2 US based venture philanthropy organisations operated internationally. The other international venture philanthropy organisations mentioned were based in India, Hungary, Canada, and the UK. Therefore, of the US based venture philanthropy organisation 2 out of 38 operated internationally, about 5%. Looking at the table of European venture philanthropy organisations, out of the 26 listed, 17 are active internationally, which is about 65%.

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