Applying the principles of private equity investing to achieve philanthropic goals
What is Venture Philanthropy?
Venture philanthropy applies approaches from venture capital and private equity investing to achieve philanthropic goals. The term, coined in 1969 by John D. Rockefeller, was first used to describe ‘an adventurous approach to funding unpopular social causes’. In philanthropic circles today, venture philanthropy is included in the spectrum of investing and seeks to create transformative social change by equipping non-profits and charities with the tools necessary to develop into efficient, high-performing, effective organizations.
Methods of Venture Philanthropy
There are five main methods organizations use to apply a venture philanthropy approach to working with non-profit organizations (Source: Social Innovator)
High Touch Engagement
Venture philanthropists often work very closely with non-profit and charitable organizations to provide hands-on support and expertise and enable these organizations to achieve their social impact goals. This support may come in the form of board membership, consultative services and more. By engaging closely, venture philanthropists gain a strong understanding of the type of impact an organization is poised to achieve, and how to maximize it.
Sustained support from venture philanthropists often ranges from three to five years and allow organizations to identify impact objectives and make significant strides to achieve them
This support comes in the form of strategic planning, data analysis, human resources support, legal counsel, and advisory services provided to the non-profit organization
To ensure the longevity and sustainability of an organization, venture philanthropists engage in capacity building in order to increase operational efficiency
Venture philanthropists measure the performance of non-profit and charitable organizations by identifying impact objectives, establishing metrics and determining whether impact achieved can be attributed to the organizations activities and inputs
Using Social Return on Investment (SROI) to measure, analyze and assess impact
Social Return on Investment
Economic Impact Per Year (at scale)
Growth of Organization
We support organizations with quantifiable social impact. A key tool the Centre uses to assess and communicate impact is social return on investment (SROI). In collaboration with the Boston Consulting Group, LEAP develops SROI models to measure and account for social, environmental, and economic costs and benefits of the interventions in the portfolio.
The concept of social return on investment is broader than that of accounting and financial return on investment. SROI is about the value a particular intervention contributes to society and less about money. We do not use SROI to compare charities, but rather, to gain a deeper understanding of the social impact being achieved by specific programs.
We interpret social return on investment through the lens of government savings. As more game-changing interventions are scaled across Canada and address the most pressing needs of vulnerable communities, the government is able to channel funds towards other areas. SROI enables the Centre to measure the present value of a program’s future benefits to society.
Case Study in SROI: Pathways to Education
Pathways to Education is a community-based program for high school students from low-income families that aims to break the poverty cycle by reducing high-school dropout rates. The program provides students with tutoring, mentoring, and financial support. Pathways gained access to crucial data by getting the school board to agree to share course and graduation outcomes for each student who signed up for the program.
To determine the social impact of the program, BCG conducted an analysis in 2007. The SROI that BCG quantified was remarkably high—the study showed that every dollar invested in Pathways delivered $24.50 in social returns for the broader community, through students’ higher income and taxes in later years, or by their avoiding social costs in health care or the justice system. The results confirmed the beliefs of Pathway’s founders—that removing the barriers to a good education would allow low-income students to achieve the same academic success as their more affluent peers. LEAP applies this approach in its engagement with non-profit organizations in its portfolio to identify, measure, and maximize social impact.
OFFORD GROUP ISSUE | PERSPECTIVES ON CANADIAN PHILANTHROPY: IMPACT
A report with Offord Group's latest research and case studies on the growing role of impact in the sector, including a feature on LEAP's work applying the venture philanthropy approach in Canada.
BCG REPORT | TOTAL SOCIETAL IMPACT: A NEW LENS FOR STRATEGY
An introduction by BCG to the growing importance of the concept of total societal impact and the trends supporting businesses to use their core business to create both positive societal and business benefits.
BCG REPORT | IMPACT-BASED PHILANTHROPY
An in-depth analysis by Kilian Berz, Peter Dawe, Andrew Steele, James Tucker on the fragmentation that plagues the charitable sector and how to reverse it.