Last December, KITE Invest featured the article, The Next Step in Investment: Venture Philanthropy, in order to shed light on this increasingly relevant, powerful and growing sector. We recently had the opportunity to delve further into this dynamic space, which, Kurt Peleman, the CEO of the Belgium-based European Venture Philanthropy Association (EVPA), refers to as “matching the soul of philanthropy with the spirit of investing.”
KITE: Venture philanthropy (VP) aims to take investment a step farther by not only investing with societal impact, but also, has the inherent aim of a good return on investment. From the perspective of EVPA, how would you classify a ‘good’ investment?
Kurt Peleman: In the case of EVPA, the definition of a ‘good’ investment in the space of what we call venture philanthropy (VP) and social investment is, “Matching the soul of philanthropy with the spirit of investing.” Meaning that the soul of philanthropy is the main drive and is making the world better in very general terms. The spirit of investing means that, investors are societally driven organizations and making impactful investments. Also, a good investment from our side is an investment that allows for sustainable positive societal change. The element of sustainability means that you have a business model that allows for you to continue and to grow.
Within VP there are different types of financial instruments. Grants, for instance, are 100% loss or 100 % negative return, financially speaking. Other types are debt, guarantees or equity stakes. For EVPA within these instruments, what is important for us is that ultimately the soul of philanthropy will be a dominant factor. Therefore, what we consider acceptable financial returns within the soul of philanthropy falls under a wide range.
Furthermore, there is a huge difference between being a social investor in India or in Africa than one investing in projects of the homeless in Brussels or in London. Overall, it is easier to combine relatively high financial returns with high societal returns in low-income countries, than in Western Europe.
KITE: In terms of the variance between financial returns coming from Africa or Asia versus Europe, does this have an affect on the amount of investing that EVPA has seen in Europe compared to other regions in the world?
KP: In terms of Europe and in the space of philanthropy we tend to find that investments and grants made are made within the space close to you and one’s home environment. People are driving by the philanthropic part, but also, by how the heart beats for the people and children and environment of one’s home city.
KITE: As VP tends to have a local aim does EVPA have a role in raising awareness about societal impact locally and throughout Europe?
KP: Raising awareness about societal impact is what we refer to as the impact measurements. Societal change is a complex area, because it is very multidimensional and it is very challenging to measure societal impact, as well as, expensive and requires many resources, that are often limited in the VP community.
In order to contribute, EVPA has developed a guideline of best practices of what we have seen throughout Europe. The first area the guideline addresses individuals in the sector of societal change and evaluating their contributions, as it is important to measure your impact. The second measure we put forward addresses the processes that can be followed at an organizational level.
KITE: Venture philanthropy engages a diverse group of people, from individual givers to private equity firms, how would you say VP differs between the two?
KP: In terms of Europe, the heart of VP comes from the investments made from the private equity and venture capital space. For instance, five seasoned venture capital and private equity players founded EVPA thus, demonstrating how EVPA’s mission is the soul of philanthropy with the spirit of investment. The private equity and venture capital community has been and continues to be a crucial dimension of VP and EVPA. They have introduced many lessons learned to the VP community, such as the importance of building strong organizations, and that investments need to be made in a multi-year perspective. Their vision and experience is crucial, as they add a lot of expertise, flexibility and result-oriented knowledge. A good venture capitalist / private equity player can offer a lot within the space of societal change.
KITE: EVPA appears to be going global with the Asian Venture Philanthropy Network (AVPN) collaboration. What was the reason behind this initiative and could you comment on the relationship between EVPA and AVPN?
KP: It is less of EVPA going global, than VP as a whole is going global. There is an interest held throughout the community of philanthropy to create global networks. In regards to AVPN, one of the founders of EVPA was also the founder of AVPN. Therefore, beyond a strong structural partnership, EVPA and AVPN have a strong personal tie.
In regards to our members from other continents, EVPA as a network of venture philanthropy is often approached by other organizations outside Europe because they want to learn. It is the organization reaching to EVPA for assistance and to learn, because they do not have the same type of network and are isolated. However, while we have members from outside of Europe, EVPA remains focused and true to Europe.
KITE: Even though EVPA is focused on Europe, could you address how VP is today globally? Is there the same level of vibrancy in other regions as there is in Europe?
KP: It depends on how one defines VP and whether or not traditional impact investing is included. In terms of how EVPA defines VP, we have found that it is increasing everywhere. However, there is quite a different association of VP if you compare Asia to Europe to Latin America to the United States, because they all have different dimensions of it. Overall there are more actors getting into the philanthropic space, and more formal and informal networks being created – an increase overall, but with different priorities and different approaches.
In the big markets found in the United States and Europe, I think for VP/social investments have traditional foundations. Whereas, there are less of these traditional foundations in Asia and therefore, growth tends to come more from investors than from social investors. Within Europe what EVPA has found is that the traditional foundation of pure grant making is an important component. One can see that even within Europe, Eastern Europe philanthropy is quite different from Western philanthropy, because Eastern Europe lacks the traditional private philanthropy. For instance, comparing England, Slovenia, Greece and Italy, these are four very different situations and realities of the investment sector.
KITE: Prior to EVPA, you worked with Doctors without Borders. In a sense your career has shifted from the humanitarian sector to VP thus, bordering between the humanitarian sector and the financial sector. What would you say were some of the reasons behind this shift?
KP: With Doctors without Borders what drove me professionally was to be active in an operational society and in a relevant organization in different countries, and I was able to find this with Doctors without Borders for more or less 10 years. After this, I wanted to return to Europe, but also remain in the societal sphere. It is with this reflection that I shifted because I wanted to focus on how to improve how money is given away and how money is invested. Furthermore, I have found that the sphere of VP has huge leverage, because you can influence how resources are distributed and still my focus of creating sustainable societal impact.
KITE: Thank you for your time and glimpse into the world of venture philanthropy. The work that EVPA is doing throughout Europe is definitely an example for venture philanthropy and investment overall around the world.