In the 1990s wealthy American dot.com entrepreneurs turned ‘do-gooders’ cottoned on to the idea of venture philanthropy (VP), which applies the principles of venture capital and private equity investing to charities. Many of the 90s breed failed miserably in the not-for-profit sector and retreated to Melno Park.
A decade later, Europeans embraced the notion and set up the
Impetus receives most of its funding from the private equity industry, including
Impetus is now looking towards an exit but the VP is treading on new ground. CEO Danelia Barone Soares says: “The VP that is most similar to our business model is New Profit Inc., which is based in the US. And it has decided that it will never have an exit. That charity is employing venture capital ideas of change management and turnaround but will not be making exits. We want to make exits but will not leave our charities in the lurch.” Barone Soares, who was formerly with BancBoston Capital, is a VC through-and-through and is approaching this exit with the same techniques used regularly in that industry. The charity is already financially self-sustainable and Impetus has been phasing out its investment but for it to continue on its growth trajectory it will need another long-term investment. Impetus is exploring the possibility of merging St. Giles with another homelessness charity, or finding another venture philanthropy house or foundation to take over its funding. Barone Soares and her team organised a roadshow to find an investor, a completely novel concept in the charity space. The executives of St. Giles practised their pitch in front of some venture capitalists and the team were thoroughly grilled. “It is unlikely that other VPs or foundations will be so quizzical but it was good training for the team and it helped to build their confidence,” says Barone Soares.
It may also be possible for St. Giles to take a long-term loan because it owns its building and could do sale and leaseback, enabling it to fund its own growth. Barone Soares says: “St. Giles also has some income-generating consultancy work so they would qualify for a loan. We are trying to use all our experience in the venture capital industry to make this and all the charities we invest in successful.”