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Exploring New Capital Models for the Nonprofit Sector
Just as the "new economy" is revolutionizing the global capital market of the for-profit sector, the emerging field of "venture philanthropy" is poised to have a significant impact on the face of philanthropy around the world. Venture philanthropy is an emerging field of philanthropic "double bottom-line investment" that combines the practices of long-term investment and venture capital models of the for-profit sector with the mission-driven principles of the nonprofit sector.
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Since 1997, the Nonprofit Enterprise and Self-sustainability Team (NESsT) has worked to foster the use of venture philanthropy approaches in the emerging economies of Central Europe and Latin America. Lack of access to capital is nearly always an obstacle for entrepreneurs - nonprofit and for-profit alike. For Central European and Latin American "social entrepreneurs" seeking to start-up or expand self-financing activities, the barriers to identifying sufficient financial capital are especially significant. NESsT is particularly interested in making new forms of capital available to nonprofit entrepreneurs and in ensuring that these resources are adapted to the special needs of mission-driven organizations.
In an effort to share the lessons-learned by
venture philanthropists around the world with
corporate leaders, donors, investors and policymakers
in the emerging economies of Central Europe and
Latin America, NESsT hosted the International
Venture Philanthropy Forum in 2001 in Budapest,
Hungary. The Forum focused international attention
on the development of a new "capital market"
for the nonprofit sector. The Forum was the first
event of its kind to bring together these corporations,
investors and donors from the emerging economies
of Central Europe and Latin America with colleagues
from the United States and Western Europe to share
experiences from the emerging field of venture
philanthropy.
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Enjoy the
Historic Beauty
of Cosmopolitan Budapest
Eclectic Budapest provided
the backdrop for participants to examine strategies
for furthering the field of venture philanthropy
in emerging market countries of Europe and Latin
America. |
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Furthering the Field
The International Venture Philanthropy Forum and NESsT's
published book on the topic -- Not Only For Profit -
are the first attempts to bring greater clarity, definition
and critical reflection to the emerging field of venture
philanthropy. Various practitioners and thinkers worldwide
are using the same terms of "venture philanthropy"
and "social entrepreneur" to mean very different,
albeit interrelated, things. Some venture philanthropists
"invest" in the organizational development
of nonprofit organizations to help them "scale
up." Others invest in the business/enterprise activities
of nonprofit organizations to help them generate income
to become more financially sustainable. Still others
invest in "social innovators," i.e., individuals
who are addressing a critical social problem in a particularly
innovative way. While all of these are noble and much-needed
efforts, the lack of clarity of terms has made the fields
of venture philanthropy and social entrepreneurship
confusing to many, if not meaningless to others.
Examining Innovative Models
A number of venture philanthropy funds have emerged in recent years. Many donors and investors are looking at alternative financial tools (e.g., program-related investments, loans, etc.) to support nonprofit organizations. However, never before has there been a systematic, critical effort to examine these models, bring greater clarity to the terms and strategies of the field and to assess their effectiveness and potential for replication. It is important that as donors and investors adopt a venture philanthropy approach and begin to use the strategies and language of the for-profit investment world, that there be more critical analysis and understanding of the implications of such a turn for the nonprofit sector generally and for nonprofit organizations specifically.
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Meet Other Leading Donors and Investors The
NGO Venture Forum in 1999, also hosted by NESsT in Budapest,
focused on the demand side (needs of nonprofit
entrepreneurs). The International Venture Philanthropy
Forum focused on the supply side (strategies for
capitalizing nonprofit enterprises). |
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Convening the Pioneers
NESsT convened a group of 150 participants from over
10 countries, including: fund managers, corporate leaders,
investors, donors and "new economy" entrepreneurs
for three days to share lessons learned and strategies
for furthering the field of venture philanthropy in
emerging market countries.
Leaders from the following funds attended the International
Venture Philanthropy Forum to share their lessons with
investors and donors from Central Europe and Latin America:
Calvert Foundation (Bethesda, Maryland, USA); Charities
Aid Foundation/Investors in Society (London, England);
Endeavor (New York, NY, USA and Santiago, Chile); Environmental
Loan Fund (Washington, DC, USA); Fondo EcoEmpresas (San
Jose, Costa Rica); Fondo Latinoamericano de Desarrollo
(San Jose, Costa Rica); The Integra Venture (Bratislava,
Slovak Republic); Local Investment Fund (London, England);
NESsT Venture Fund (Budapest, Hungary & Santiago,
Chile); New Profit, Inc. (Boston, Massachusetts, USA);
Roberts Enterprise Development Fund (San Francisco,
California, USA); South-North Development Initiative
(New York, NY, USA and Buenos Aires, Argentina).
The International Venture Philanthropy Forum addressed
these key goals:
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to provide greater international attention, definition and legitimacy to the field of venture philanthropy; |
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to share practical lessons learned, reflect on and critically evaluate the experiences of venture philanthropy investors from Europe and the Americas; |
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to consider strategies for fostering venture philanthropy in the emerging democracies of Central Europe and Latin America. |
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Meet the Pioneers
in the Field
Cynthia Gair,
Enterprise
Development Director, Roberts Enterprise Development Fund |
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