A bright future for European venture philanthropy

What do a program of mentoring, courses, and loans for Spanish social businesses, the refurbishment of 1960s and 1970s tower-block apartments in Malmö, Sweden and an intensive school-based support program to help disadvantaged young people living in the East End of London have in common?

They are all examples of what Leonora Buckland, Lisa Hehenberger, & Michael Hay, writing in the Stanford Social Innovation Review (Summer 2013) identify as examples of venture philanthropy – an approach to supporting enterprises that are delivering social outcomes – such as supporting small businesses in Spain or disadvantaged young people in London. In venture philanthropy the emphasis is on using a mix of funding tools to support organisations to help them tackle social problems effectively and at scale. As governments are also starting to realise, a welfare-based model for delivering social services can be supplemented by engaging social enterprises and social entrepreneurs and supporting them through investment. Venture philanthropy, Buckland, Hehenberger, & Hay say, is moving from “a noisy niche into an integral part of the broad philanthropic and socially responsible investment field” .

Venture philanthropy is characterised by a number of features including: (1) engaged hands-on relationships between the supported organization’s management and the venture philanthropists (2) the use of a range of financing mechanisms, including grants, debt, and equity (3) the provision of value-added services such as strategic planning to increase the organisation’s capacity and effectiveness (4) sustained long-term support, and (5) business planning and financial accountability and transparency.

As the Leasing Foundation develops its approach in this area, the topic of venture philanthropy has been part of our thinking and will be discussed at the Foundation’s First Annual Conference on 30 September. We’ll be debating if and how the Foundation can engage the industry in a broad programme of which venture philanthropy – supporting innovative projects and social businesses through investment – is a central part.

As Buckland, Hehenberger and Hay say:

 “Although venture philanthropy is poised to grow in Europe, it will not necessarily be under the banner of venture philanthropy, nor will it be undertaken primarily by dedicated venture philanthropy organizations. Instead, many of the programs are likely to be undertaken by traditional foundations, corporate philanthropy, public policy initiatives, and impact investors. “

 The figures for philanthropy across Europe that they cite are revealing. In Europe, philanthropy makes up only 0.1 percent to 1 percent of GDP (depending on the country) compared to 2 percent of GDP in the United States. The European Venture Philanthropy Association (EVPA), revealed annual expenditures of €278 million by 61 European venture philanthropy respondents – but  only a fraction of total European foundation expenditures of €46 billion by 60,000 foundations.

Revealing also are the differences between the approaches of European countries. UK philanthropy is strong, with a social sector that receives a substantial amount of funding from government and much less from private investment. The Nordics on the other hand, have a small social sector (by % of total employment) but one that is based on a strong volunteering culture centered around associations, with nonprofits functioning as vehicles for political, social, and recreational interests. The Czech Republic, Poland, Slovakia, and Hungary, with only 0.2% of total employment in the social sector,  rely much more on private philanthropy for funding.

Arguably, the UK leads Europe in terms of philanthropy, with a well-developed ecosystem of venture philanthropy organizations and a social enterprise sector that provides a rich set of organizations to invest in – all set against a backdrop of large-scale government initiatives to boost and fund venture philanthropy, such as Big Society Capital.

Leonora Buckland, Lisa Hehenberger, & Michael Hay’s piece has several messages relevant to the Foundation, but perhaps the one that resonates with our thinking is:

 “Venture philanthropy can provide the missing middle between pure philanthropy on one hand and equity investments by impact investors on the other.”

 As they say:

 “Venture philanthropy is a growing force in Europe. The number of funds and organizations devoted to this approach is increasing, as is the amount of money invested. As important as those efforts are, venture philanthropy can have an even greater impact on society by focusing on the dissemination of its practices to impact investors, governments, traditional foundations, multilateral organizations, and other influential actors.”

Join us to talk about philanthropy at the Foundation’s First Annual Conference on 30 September hosted by RBS in London. Speakers on philanthropy include Tris Lumley, from think-tank New Philanthropy Capital on impact measurement, and Verity Rowles from Macmillan Cancer Support on the challenges of modern fundraising.

http://leasingfoundation.org/conference2013


 

The Growth of European Venture Philanthropy by Leonora Buckland, Lisa Hehenberger, & Michael Hayhttp://www.ssireview.org/articles/entry/the_growth_of_european_venture_philanthropy