Return on Endowment
Alberta charities weary of chasing donors and dollars are seeing “venture philanthropy” as the key to self-sufficiency.
Is it really the gift that will keep on giving?
by Jennifer Cockrall-King
Perpetual motion might seem a natural state for Carol Kelly, but as executive director of the Medicine River Wildlife Centre (MRWC) [1], it’s a necessity. On a summer day, the phones start ringing as early as 7 a.m., with Kelly handling as many as 50 calls on the busiest days (overall, upwards of 8,000 a year) regarding everything from the rescue of oil-slickened birds to someone frantic from hitting an animal on the highway. “It quiets down about nine or 10 at night,” says the bubbly 57-year-old. “But then I’ll get a call in the middle of the night about an injured fox and I’ll have to leap out of bed.”
In 1984, after some vet clinic experience, Kelly thought she’d simply nurse a few animals in her backyard. Now, MRWC is a 300-acre animal rescue shelter and sanctuary 41 kilometres west of Innisfail. Last year, it treated 1,007 wild “patients” from across Alberta. It put on 200 educational programs for groups ranging from pre-schoolers to seniors to inmates at correctional institutions. As with most non-profits, demand outstrips capacity of three full-time employees, Kelly included, plus volunteers. “We really could use another four full-time paid staff,” she sighs.
MRWC receives no government funding to meet its $400,000 annual operating budget. Instead, it engages in the usual fundraising activities: selling merchandise, memberships, running casinos and writing grants (Kelly applied for 17 last winter alone). “You always have your hand out looking for money,” says Kelly.
Like other non-profit operators, Kelly realizes the approach is unsustainable. She’s now on a mission to find not just a donor but an investor to help run the centre more like a revenue-generating business. MRWC has already added ecotourism components and there are plans for a children’s book featuring the centre’s great horned owl, Otis, a permanent resident. But in the non-profit realm, business skills and corporate connections aren’t a given. “When I heard about venture philanthropy, I thought, ‘Wow, that’s the answer.’ These are people who already have successful businesses, so for them, it’s just natural.”
With the Alberta economy still in recovery mode, and charity dollars scarce even for well-established non-profits, venture philanthropy is gaining a foothold in corporate social responsibility programs. Groups like MRWC are soliciting business investors to be mentors and partners to provide them a competitive edge and even a self-sustaining business model that could make them less reliant on donors. In theory, it’s a win-win situation.
It sounds like a logical solution to the charity cash crunch, but as a relatively new concept, the definition of venture philanthropy is still a moving target. Some forms are even bound to raise questions, particularly when enterprises emerge, as some have, with promises of financial returns for not just the charities they support but for the investor-donor, the newest kind of giver on Alberta’s philanthropic scene.
Venture philanthropy emerged out of the mid-1990s tech boom, when a handful of brash, young Silicon Valley innovators became overnight millionaires and even billionaires. Some, like Paul Brainerd, founder of Aldus Corp. [2] (purchased in 1994 by Adobe Systems Inc. for US$450 million), envisioned putting their windfall toward affecting social change in a way that would completely remake the donor-charity paradigm. Brainerd started Social Venture Partners in 1997 with a mission to create a “philanthropic community that borrowed from venture capital practices.”
Today, it has evolved to encompass its own jargon and operating models, adopted from the for-profit business world. Donors are referred to as “investors”; charities and non-profits are “investees.” Investors give time and expertise as well as funds, and place an emphasis on building capacity within a non-profit. Often they take on directorship roles for a fixed term, usually three to five years, in which measurable results guide the investor-investee relationship. And most importantly, there is an exit strategy for the investor. Investees are expected to reach a level of self-sufficiency and business acumen by a “graduation date.”
This concept appealed to Brad Zumwalt, Alberta’s own dot-com success story, and his wife Tanya. In the days preceding the tech bust, before which Brad fortuitously sold his digital image distribution company EyeWire to Getty Images, the Zumwalts moved in the same circles as Brainerd and felt his next-gen philanthropic model would suit Calgary’s entrepreneurial business culture. They started Social Venture Partners (SVP) Calgary [3] in 2000.
SVP Calgary is the most well-established example of venture philanthropy in the province. It’s a registered non-profit public foundation with a mandate to provide funds and business expertise to Calgary charities supporting youth and education.
It acts as both a fixed-term source of funding for its associated charities, and as a business incubator where non-profits access the business acumen and corporate network of its investors. Investors each contribute $5,000 annually, but when the money is pooled through SVP, partner charities receive between $20,000 and $50,000 a year. Its investors have supported programs such as Calgary Reads [4], Calgary Bridge Foundation for Youth [5] and the Brown Bagging It for Calgary’s Kids Society [6].
“For me, it’s the reward of following your money,” explains Krystyna Williamson, half of a philanthropic couple who have been heavily involved SVP Calgary investors since 2002. “I give my $5,000. I pool it with other like-minded individuals who I get to know and enjoy being with. Then I get a seat at the strategic planning mission of that charity organization and help them recraft their mission statement to better express what they do.” Williamson also credits SVP for turning Andy Williamson, her “traditional” philanthropist husband – “the cheque-writing kind with no time” – into a much more engaged philanthropist.
“We hear back from all of our investees that the money is nice but the time is invaluable. We’re scaling up operations that are already out there. We’re making them more efficient, more effective. It’s really the leading edge of philanthropy right now.”
This type of partnership has been on Sheila Carruthers’ radar for about five years, but she wonders why it has taken so long to catch on in Alberta. Carruthers’ Calgary-based CSR Strategies Inc. [8] specializes in integrating socially responsible strategies in Alberta’s business and non-profit cultures. “It’s just like the micro-credit revolution in the developing world,” she says, “just closer to home and with bigger dollar amounts.
“It’s new, so it takes a lot of dedicated people to get to that tipping point where it is accepted as a good financial model. It’s not just financial modelling, but truly understanding social need as well,” she speculates. “And of course, in a recession, people’s good intentions are not always going to be realized when they first have to batten down the hatches and stick to the core investment strategies that have always been in place.”
Some market watchers, though, approach this new model with more of a cautious eye. “There are challenges to venture philanthropy,” warns Gary McPherson, executive director of the Canadian Centre for Social Entrepreneurship [9] at the University of Alberta School of Business. “It depends on how many strings are attached. Sometimes the people who are giving the money might have too much influence on how it is used.”
Moreover, McPherson mentions that the returns on investment for most social enterprises looking for investment are less than what a venture capitalist would expect in the general market. He certainly thinks it’s worth a potential venture philanthropist’s time to turn a critical eye towards any social enterprise startup looking for venture capital.
“There may be a few home runs out there, but they are few and far between,” he says. “It’s certainly not the norm.”
Then there’s the worry that venture philanthropy and social entrepreneurship can lead to just another capitalist venture in philanthropic robes. This is where the idea of adding an actual financial return on investment comes in. And whether you see that as a clever way to attract investor-donors or as a complication of morals or ethics, it’s the backbone of Alberta’s newest and perhaps most aggressive venture philanthropy model. Venturion Inc. [10] is an unapologetically for-profit concept that is selling itself on its plan to pay both investors and participating charities. It launched in Calgary in 2008, and its website and marketing materials trumpet the ambitious mission to double investors’ money and create $200 million in capital for charitable funding over the next four years.
“I’ve always said that people can make just as much money investing in homeless shelters as shopping centres,” says Venturion COO Steve Chapman. Instead of homeless shelters, Venturion’s investors buy art: original paintings from the company’s collection. Investors own the work outright, but Venturion licenses the right to make prints on a large scale from the art. Charities across North America can then make use of their volunteers as a sales force to lease these prints to major hotel chains, developers, restaurant chains and other businesses that tend to need art prints in bulk. The idea is to create an ongoing revenue stream back to the original investors and charities, while the print-buyers get something they would normally need anyway.
“We started with a concept of maximizing dollars for charities,” Chapman explains. “We created the business around the charity-giving model.”
As a former City of Calgary police officer and having run for Calgary city council, he felt social problems needed to be approached in a more aggressive way. “It’s a go-big-or-go-home undertaking,” he says. Indeed, its success will depend on millions of dollars of front-end investment, plus economies of scale at all levels to maximize profits for all involved. He concedes that in the time between the launch and the recession that hit shortly thereafter, Venturion has scaled back its target from $200 million in revenue to “$50 to $100 million.” He won’t divulge how much capital Venturion has raised, but says they’re “almost there,” referring to the startup investment from investors. By next year, Venturion hopes to have all of the capital investment in place, and estimates that the business model will be “active in 18 to 20 cities in North America, working hand-in-hand with about 100 different charities.” On average, he estimates that each charity will be making $20,000 to $30,000 per month.
Even if it all sounds too good to be true, Chapman makes no apologies for considering this radical form of venture philanthropy the best solution to social problems. “I’ve always believed that if you want to solve any social problem, or any problem for that matter, put 10 entrepreneurs in a room and challenge them to make money on it. Our slogan really sums that up: Make a profit while you make a difference.”
Clearly, Alberta’s venture philanthropy frontier is still a Wild West of competing ideals and models. While SVP Calgary banks on the value of delivering social dividends through its investees, Venturion intends to turn risk-ready investors into accidental philanthropists. But even if the latter remains untested and unproven, SVP so far has established that a new philanthropic outlet, one that allows for increased donor involvement and the creation of self-sustaining charities, has a place in Alberta. And as proof that such organizations can thrive look no further than Earth Water International Inc. [11], a bottled water company started in Edmonton and that gives 100% of its net profits to the United Nations Refugee Agency [12] and now has operations across Canada, in the United States, Netherlands and Portugal.
Nonetheless, the ethical and philo-sophical debates around revenue generation amongst the charitable set will likely swirl for quite some time. To the countless non-profits currently forced to appeal to cash-strapped givers, however, that debate doesn’t mean so much. Rather than accept the need to compete for attention and money, Carol Kelly will continue her search for an engaged investor who will see the value of helping her get the Medicine River Wildlife Centre out of survival mode and into a thriving, growing business mode. And if she succeeds, she’ll finally be able to hire those four more full-time staff she so desperately needs.
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Article printed from Alberta Venture: http://www.albertaventure.com
URL to article: http://www.albertaventure.com/special-reports/special-reports-corporate-social-responsibility/return-on-endowment/
URLs in this post:
[1] Medicine River Wildlife Centre (MRWC): http://www.medicineriverwildlifecentre.ca
[2] Aldus Corp.: http://en.wikipedia.org/wiki/Aldus
[3] Social Venture Partners (SVP) Calgary: http://www.svpcalgary.org
[4] Calgary Reads: http://www.calgaryreads.com
[5] Calgary Bridge Foundation for Youth: http://www.calgarybridgefoundation.com
[6] Brown Bagging It for Calgary’s Kids Society: http://www.makeityourproblem.ca/
[7] Image: http://66.187.108.154/~albertav/openx/www/delivery/ck.php?n=a55add12&cb=INSERT_RANDOM_NUMBER_HERE
[8] CSR Strategies Inc.: http://www.csrstrategies.ca
[9] Canadian Centre for Social Entrepreneurship: http://apps.business.ualberta.ca/ccse/
[10] Venturion Inc.: http://www.venturion.ca/home
[11] Earth Water International Inc.: http://earth-water.org
[12] United Nations Refugee Agency: http://www.unhcr.ca