1. Social Impact Partners: A Venture Philanthropy Foundation “Putting an economic engine into a charitable vehicle” Liquidnet Impact Challenge 2011 W. Nathaniel Brown - Eric Miller - Brandon Prichard
2. Introduction Our Goal: Change the mindsets of nonprofit contributors from “donors” to “social investors” and of nonprofits from “charities” to “social enterprises.” Our Strategy: Perfect a new model of philanthropy through imitation of venture capitalists. This model builds on the concept of venture philanthropy. We propose the creation of a foundation called Social Investment Partners (SIP) that will: Hold industry-specific funds that will be focused and capped Target mid-sized foundations and high-net worth individuals for funding Target strictly non-profit organizations as donation investments Be constructed and managed much like a VC fund (with a few exceptions) Focus on long-term relationships with portfolio organizations Our Vision: To be the first of many such venture philanthropists (VPs) that will one day operate in a competitive market of VPs; to fund non-profit organizations that provide the greatest social benefit. 2
3. How We Meet Current Problems Grant-making foundations and high net worth individuals: Seek high-impact social programs, But are stuck in a “donor” mindset, And lack the due diligence and proper financial systems/processes to identify the best social investment options. Our business model meets these needs. 3
5. Our Business Model Step 1 – Social Investment Partners conducts extensive due diligence to build portfolio of non-profit organizations (NPOs) that meet the Fund criteria. NPO 2 NPO 1 Social Investment Partners NPO 2 NPO 1 NPO 3 Mid-tier Foundations High-Net Worth Individuals Step 2 – Once the NPOs are selected, Social Investment Partners shops for funding from its target investors based on the mission of the Fund. Social Investment Partners ***We understand that Step 1 and Step 2 have elements of simultaneity as we recognize the needs of the donors and aggregate like-donors into a Fund profile. 5
6. Our Business Model Step 3 – Foundations and individuals invest money in a focused Fund that Social Investment Partners sets up. The Fund then invests in the portfolio non-profits. SIP collects a management fee from investors which covers the foundation’s overhead. NPO 1 Social Investment Partners NPO 1 NPO 2 Social Investment Partners Step 4 – Social Investment Partners develops a long-term partnership with portfolio non-profits building organizational capacity and strengthening program delivery. SIP will hold board positions where necessary and consult on hiring decisions. VP Fund 1 Mid-tier Foundations High-Net Worth Individuals 6
7. Our Business Model Additional Details Start with 3 mission-driven fund profiles: Health, Community Development, and Cleantech Focus on domestic nonprofit organizations first Look for safe investments – no need to look for the “homeruns” A Board of Advisors will help oversee each Fund 5-8 year relationships with portfolio organizations SIP will engage in late-stage, follow-on fundraising assistance with their portfolio organizations Commitment and Incentive Concept As an innovative test of nonprofit commitment, each nonprofit will be contractually obligated to contribute 10% of its future funding over and above past levels of SIP funding to be reinvested into a follow-on SIP Fund. This concept strengthens the mutuality of the partnership between SIP and the nonprofit; it also strengthens commitment to venture philanthropy. E.g., NPO 1 currently raises $5 MM annually. Through a $1MM investment and major partnership with SIP, NPO 1 now raises $8MM annually. We will request 10% of $2MM ($8-6MM) be contributed to future SIP funds. 7
9. High-Level Implementation Plan Form Social Investment Partners, a foundation, under IRS rules. Secure funding from other foundations and high net worth individuals for Funds that focus on high-impact and willing non-profits. Earn management fees consistent with IRS rules for foundation compensation. Leverage additional third party organizations that seek high impact philanthropy to champion the venture philanthropy model in hopes that imitators will spawn. Post fund portfolio and investment performance on website and, ideally, in social value marketplace. Raise money for additional Funds. Consider implementing additional ideas (see next slide). 9
10. Conclusion and Additional Ideas While a class of venture philanthropists and social capitalists currently exist, most of them are more word than deed. Our concept is to imitate traditional venture capital as much as possible for the nonprofit contribution space. We want to help set up a market of venture philanthropists that are transparent with their social value creation, metrics, and management fees, and that operate competitively. As the model develops, SIR will adapt additional ideas that work in entrepreneurship or private equity to serve the nonprofit community: Academic social entrepreneur programs Social incubator programs Large social private equity funds functioning like VPs at a larger, more established scale Build in more incentives, e.g., most improved or highest SROI non-profits within the fund receives a bonus of $1M 10
