BonVentures is a social venture capital firm; they support enterprises that connect humanity and the economy, and contribute to sustainable solutions social and environmental problems. The firm was the first of its kind in Germany, launching in 2003. Prior to BonVenture, there were no other firms that practiced social venture capital and venture philanthropy. BonVenture’s CEO, Erwin Stahl spoke with KITE Invest about the outlook of venture philanthropy in Germany.
KITE Invest: Would you mind first by laying the groundwork and explaining the main differences of these two forms of start-up funding (social venture capital and venture philanthropy)?
Erwin Stahl: Venture Philanthropy is using Venture Capital techniques (Due Diligence, Support, Network etc) and milestone payments as strategy to provide grants and donations.
Social Venture Capital is providing Venture Capital Investments focused on the social/ecological sector (compared to most that are active in the tech sector) with loans, mezzanine and especially equity.
KITE: What is an example of a company or initiative that has been well known as a result of venture philanthropy?
ES: One well-known example in Germany is the organization Teachfirst, built after the American initiative Teach for America. Teach First is aiming at involving excellent young people in the education sector and has been built based on grants; other examples in Germany are Wellcome or LobbyControl (we provided these with networking, pro bono support and helped to implement a financial and social reporting)
KITE: What was the process that BonVenture undertook in order to become the first social VC in Germany?
ES: BonVenture was initiated by a small circle of dedicated philanthropically motivated families who wanted to explore new strategies to leverage social innovation. When they started they did not even know if there was such thing as social entrepreneurship in Germany. They then set up a professional intermediary as they knew it from the business world and they approached me to become the first Social Impact Investment Manager in Germany. We had to build the expertise on bringing together the social and the business world from the scratch, like for example developing a system for impact measurement and reporting etc.
The international discussion and the exchange with other early movers like Ashoka Germany was very important for us, of course. From the beginning, BonVenture was set up as a social business (no dividends to shareholders) managing both sides; that means practicing venture philanthropy via the foundation-like BonVenture gGmbH, giving grants and interest free loans to non-profits) on the one side, and investing Social Venture Capital out of up to now three funds. Out of the funds (vol. EUR 16,4 mil), we invested in approximately 25 organizations with unsecured loans, mezzanine and equity so far. At the moment we are raising our next fund “BonVenture III” with a target volume of EUR 15-20 mil.
KITE: BonVenture is one of the few European firms that can provide social entrepreneurs with equity investment, loans, donations, consulting and networking. As the first of its kind, how have you seen the industry change and adapt over the years? Are there new industry trends or advancements being presented by social entrepreneurs?
ES: Social entrepreneurs are becoming more and more professional; the market is developing and we see more potential that Social Business can not only deliver positive social impact but also a positive financial return.
Still there is not enough money in the market though.
KITE:Beyond the social parameters of deals occurring in the venture philanthropy space, are there other differences?
ES: We focus more on the social impact investing market (not donations via venture philanthropy). That market is comparable to what we saw mid to end of the 90’s in the tech sector, when a lot of people came to the market and the evolution was quite quick. The same now happens in the social sector; good new ideas, innovation, new business models that are more transparent and more efficient.
KITE: What advice would you give to a social entrepreneur to ready and complete prior to seeking out a venture philanthropist?
ES: Have a good business and financial plan and know your (social impact) value chain (input-output-outcome-impact); try to plan and control social impact goals via key-performance-indicators and try to have an as professional as possible communication process to tell the people outside what are you doing and what values you reach/achieve.
KITE: BonVenture geographical reach is Germany, Switzerland and Austria. What are some of BonVenture’s future goals and targets? Are there plans for the firm to expand it investment reach?
ES: Today and also with our next fund BonVenture III we are not planning to change our regional focus. We slightly redefined our strategy in a strategy consulting process over several months with Bain & Company in 2013 (as a pro bono project) to be more effective and details on that we usually share with potential investors.
We definitely are well equipped and absolutely committed to take the impact investing sector further also in the next years. We will do so by investing in social enterprises, sharing our knowledge with others, constantly redefining our processes and building up more expertise on how to successfully leverage social innovations with the tool kit of Social Venture Capital.