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Strategies for Foundations – when, why and how to use venture philanthropy

Posted on by EVPA


Session at the EFC AGA, Belfast, 6-8 June 2012

Check out all photos from the EFC AGA in Belfast!

EVPA, together with its member Fondazione CRT, hosted a session as part of the EFC AGA taking place in Belfast, Northern Ireland, from 6 to 8 June 2012. The objective of the session was to demystify the term “venture philanthropy” and to share with participants how foundations can use the approach.  Massimo Lapucci from Fondazione CRT and Judith Pollock from the Shell Foundation gave an overview of their venture philanthropy activities, while Deirdre Mortell from the One Foundation moderated the morning session.

Deirdre explained that venture philanthropy is one tool suiting certain types of philanthropy. While it is not intended to be seen as an alternative to other philanthropic approaches, foundations can use either all or some of the characteristics of venture philanthropy:  High engagement support of a few organisations, organisational capacity-building, tailored financing, non-financial support, involvement in networks, multi-year support and performance measurement. The Shell Foundation and Fondazione CRT presented very different examples of foundations using venture philanthropy.

The Shell Foundation has the objective of catalysing and scaling business-based solutions to challenges that are linked to the energy industry. They are working with only a small number of grantee partners and provide them with expertise from within the staff resources of the Shell Foundation in addition to financial support. Judith explained that it was a journey to get to the strategy that they now have.  When the Shell Foundation was set up, they supported a larger number of organisations many of whom already had fully developed approaches for addressing a specific challenge. However, this made it difficult to align on targets for scale of impact and approaches to achieve these. As Shell Foundation did not see the results they had hoped for, they altered their strategy and now work with a few grantee partners only, getting in early, providing them strong skills support and working with them to build solutions together. An important criterion for working with an organisation or an individual is that they find an alignment on desired scale of impact. In total, they see themselves as an angel investor. While this certainly means a higher risk, Judith explained that their success rate has indeed increased significantly since adopting this approach.

Fondazione CRT, on the other hand, uses venture philanthropy as one of three approaches, the other two being pure grant-funding and developing in-house projects. They see it as a way to better work in the public interest. Massimo presented a case study – Sharing – which demonstrated the need for a different approach. Sharing is a social housing project, which offers affordable housing to people with a low income, such as students, young couples or people with special needs. In addition to accommodation, Sharing offers social and commercial services. Fondazione CRT was involved in the setting up of Sharing, which included refurbishment of the building, done by a newly set up company called Ivrea 24. Fondazione CRT itself is not allowed to invest into commercial organisations. They have thus set up a separate foundation, Fondazione Sviluppo e Crescita – CRT, which is handling their venture philanthropy activities.

Deirdre presented a third way into venture philanthropy. The One Foundation is a family foundation, set up by Declan Ryan. In her previous job, she had worked as a fundraiser and had found it difficult to find money to grow her projects to scale. At the same time, Declan was a discouraged donor who did not see the impact he wanted from his money. As they discussed a strategy for the One Foundation, they discovered venture philanthropy as a philanthropic methodology that could address both issues.

As mentioned in Deirdre’s introduction, foundations need not – and do not – use all venture philanthropy tools. For the Shell Foundation, the most important ones are high engagement with a few partners, capacity building and multi-year support. For the investor to be confident that the investee can be sustainable, they need to accompany them through various phases and challenges with patient, long-term financial and skills support. Fondazione CRT sees capacity building – especially in the beginning –, non-financial support, multi-year support and tailored financing as the most important venture philanthropy tools.

The discussion then turned towards the difficulty of finding the right investees. Both Judith and Massimo agreed that it was difficult to find potential partners that have a new approach to tackling development and societal challenges, but that this should improve as more people try different approaches and are willing to share their knowledge and experience.

Talking of financial return, Judith explained that the Shell Foundation primarily uses grants to provide financial support to its partners and therefore does not expect a financial return. Massimo clarified that Fondazione CRT – referring to the Sharing projects and to other VP initiatives – is trying to repay its investment, in a long term perspective.

There are certainly also risks in venture philanthropy. One participant warned that we should not have too much “business” in philanthropy. Kurt Peleman, CEO of EVPA, emphasised that EVPA does not see venture philanthropy as the silver bullet, but can – as shown in the case studies – often increase societal impact.