Venture Dollars Coming With a Helping Hand
April 1, 2001 Tom Pope
The Austin, Texas-based nonprofit Knowbility holds Internet events to help people with disabilities explore careers in high-tech. But the organization’s leaders had a more national vision.
The staff of Austin Social Venture Partners (SVP) volunteered to guide the group through a financial roll-out strategy. That plan linked the organization with other cities where similar SVP groups also help nonprofits.
The SVP partner also devised a plan with the University of Texas to make the university system Web site accessible to the disabled. The effort was coordinated by Knowbility.
The Knowbility experience is just one story of venture capital funders bringing a hands-on investor style to philanthropy. The term partners comes from a variety of business backgrounds. But as funders, they share ideas and connections with the nonprofits they fund.
The SVP concept was started more than three years ago when Paul Brainerd, a former guru with the Aldus software, launched Seattle SVP. Brainerd saw that some nonprofits needed longer term funding, and that called for more engaged relationships with funders.
Seattle’s SVP lists approximately 280 partners who last year granted slightly more than $1 million to nonprofits and expect to reach between $1.3 and $1.4 million this year. Members of the Seattle SVP contribute between $5,000 and $10,000 a year for a minimum two years.
And, just like the roll-out of Knowbility, the SVP concept is being franchised. Along with Austin and Seattle, an SVP can be found in Boulder, Colo., Dallas, Denver, Kansas City, Mo., New York, Phoenix, San Francisco, St. Louis, and Calgary, Canada.
Experts believe that such venture companies will account for five percent of all grants distributed in America this year, although efforts barely register compared to the $22 billion in grants handed out annually in this country.
SVP in Denver boosts of 63 partners who grant $80,000 to four local nonprofits. Austin’s 75 partners act as paying volunteers, including husband-and-wife teams who funded $225,000 last year. The hope is to grow that to around $500,000 this year.
The SVP model, however, isn’t directed from Seattle. A loose confederation helps the concept grow nationally, according to McKeever Darby, the executive director of the Austin SVP. "The concept recognizes that things are different in each city," he said. "We’re as different from SVP Seattle as Austin is from Seattle as a city."
The various SVP groups use similar basic practices, yet the tone is local, explained Paul Shoemaker, executive director of the Seattle SVP. "It’s not a McDonald’s franchise," he said. "When the groups started in Phoenix and Austin, we just helped them keep the process going."
A conference last April brought the various groups together to determine common themes. Eventually the partners agreed on core principles, such as fostering a dual mission, engaging in grant making, focusing on long-term grants, using skills from the partners, but keeping decisions localized to remain community based.
One question emerges immediately about whether these groups really conduct philanthropy differently from traditional foundations. "We are a form of a donor-advised fund or an extension of what a community foundation does," Shoemaker said.
Measuring effectiveness of these groups may be hard, explained Jed Emerson, president of the Roberts Enterprise Development Fund in San Francisco and a Bloomberg Senior Research Fellow in Philanthropy at the Harvard Business School. "You would need to find a young community foundation around only for three years which specializes in youth and education like the SVP Seattle group."
Emerson said the issue may be less how relative success is measured than understanding the value added of the different approaches.
The Whatcom Community Foundation in Bellingham, Wash., works just such a contrast since it also serves as a young organization. Recently it funded a few nonprofits to help with youth and education.
The biggest obstacle for Whatcom is visibility. The first presentation of its annual report won a national award from the Council of Foundations, but only around 500 local people saw the information.
Foundation President Don Drake is struggling with finding the best spot in the local daily paper to release the next annual report. "We felt we would be better off with a publication that was not as slick as usual but would get information to between 40,000 and 60,000 readers," he said. "We want it in the news part of the paper – not with the K-Mart and Home Depot ads so people can discover what we do."
Drake puts his foundation at the low end of getting involved with grantees. Like most community foundations, the grantors allow local nonprofits to handle day-to-day concerns because the nonprofit is the expert in the cause.
As a contrast, the Seattle SVP bypassed some of the visibility issues because the partners arrived with the wealth from business interests. These partners work directly with funded nonprofits. The volunteer – V-Teams – use a core of six to 10 partners who desire to lend a hand to the nonprofit. One partner usually becomes the point person or leader partner to assist the organization. Activity brings a more visible connection that could strengthen the nonprofit.
One Seattle grantee called Powerful Schools forms coalitions to help connect parents with the schools. "The lead partner actively works a two-way mentoring relationship," said Seattle SVP’s Shoemaker. "We learn from the leader about the nonprofit, and the local organization learns from him about us."
Seattle’s partner teams helped Powerful Schools reevaluate its revenue generating ideas, including producing a video that helps market the organization. The teams guided the nonprofit to new technology projects, built databases and reached out with networking to find more mentors. Partners introduced them to other funders. The organizational budget grew from $400,000 to more than $600,000 as the nonprofit increased its staff.
However, Shoemaker also is quick to point out that these examples of success don’t arise just because of the SVP. "We put key pieces of infrastructure in place, but part of a success comes from other factors the nonprofit faces as well," he said.
SVP recognizes that it takes around five to six years to really make a fundamental impact. Seattle’s work with seven organizations over the past three years shows it takes time for a funder to get to know the grantee. "We have to practice a lot of humility," Shoemaker said. "Nonprofits have to learn to trust us, to know we will show up and that they can tell us bad things without our people running out the door."
The methods used in Denver allowed the nonprofit called Denver Scores to expand to a national level. The small organization combines soccer with creative writing in low-income neighborhoods that gives children one-on-one help.
A partner from the Denver SVP developed a strategic plan that focused on board development and fundraising. Partners’ help built initial funding along with setting up a funding plan for the future, said Marlene Casini, the director of advancement and communication for Denver SVP.
Each partner invests a tax-deductible minimum of $1,000 for at least three years in Denver. Many employers will match the partners’ investment, increasing the amount of dollars SVP Denver has to grant.
In Austin, SVP partners can combat the proliferation of the area by nonprofits. More nonprofits exist per-capita than other cities in the country, according to Austin SVP’s Darby. The partners’ use of a background in mergers and venture capital planning helps nonprofits to combine forces.
"In addition to investing capital, we have people who are financial experts to help nonprofits understand options with others," he said.
A local community gardens faced investment problems until a partner used banking and due diligence efforts that resulted in a merger with another group. "The nonprofit would have had to spend several thousand dollars for financiers or consultants without the funder’s help," Darby said.
A nonprofit’s track record of going through a merger to become more effective would be a measurement to gage the SVP model, said Bruce R. Sievers, executive director for the Walter & Elise Haas Fund in San Francisco. The fund, a family foundation, originates from the Levi Strauss Company and works in six different areas with an endowment close to $250 million.
Measuring the full value of the SVP model, however could be difficult. "People might be reluctant to say the merger or skills from a partner doesn’t function well," Sievers said. "They might be reluctant to say the partner’s help worked but pushed the nonprofit in a different direction."
Denver SVP emerged almost as a hybrid from traditional philanthropy. In 1999, officials at the 75-year-old Denver Foundation sensed that young business professionals were looking for a way to give back to the community in a new, innovative way.
As a result, the foundation worked with a team of business leaders to create SVP Denver, taking its lead from SVP Seattle. SVP Denver today relies heavily upon the Denver Foundation and its expertise gained through community philanthropy.
The selection process shows the difference between the SVP method and more traditional ways. Denver SVP partners looked at 25 areas to fund before narrowing the focus to youth development and education.
The SVP people wanted to see how an amount like $25,000 could become multiplied or leveraged. They desired to fund smaller organizations where their money would make a difference. "Partners wanted to get a definite bang for their buck," Casini said.
The new focus of the SVP fills a need, according to Casini, who also serves as an officer of the foundation.
"The community foundation tries to be able to cover all the bases, but the SVP approach is part of a special engagement," she said. "Rather than focus on all things to all people, the SVP partners want to focus on investing time to those who desire that aspect."
To what degree does the SVP approach help a grantee?
"If you take a large pool of 50 nonprofits around the country being helped by the SVP concept and 20 end up serving more clients for less money – that would be a good indication of success," said Sievers.
Tom Pope is a New York City-based journalist who writes about management issues.