image courtesy AVPN
"People are coming to realise that human capital is extremely important. You can't just invest capital in addressing social problems; you have to invest in a smart way."
Doug Miller is Chairman of the board of the Asian Venture Philanthropy Network (AVPN), Founding trustee of Impetus Trust in the UK, and Founding chairman and honorary president of the European Venture Philanthropy Association (EVPA). Miller believes that venture philanthropy is a methodology that has significant potential for creating social value, and that engagement can come by providing financial, intellectual or human capital. In a 2008 interview he said, "philanthropy is like a drug which produces feelings of both fulfillment and personal happiness: the more you do, the more you want to do." We couldn't agree more. In February, WINGS Managing Editor Chris de la Torre sat down with Miller to look at the sector through a business lens, and to preview this year's inaugural AVPN Conference—what will be the network's first conference in Asia.
WINGS: You say the focus of venture philanthropy "is strategic philanthropy employing a business methodology.” Explain this.
Doug Miller: Every business, no matter how big or how small, needs a plan that specifies what the goal is—what you want to achieve. It then gets down very specifically to what operating plans are established and the resources necessary in terms of financial and human capital—how these resources are going to be organised and employed. Impetus Trust, a venture philanthropy fund I was a board member of, was approached in the UK by an entity called St. Giles that was dealing with homelessness and also with ex-prisoners. We looked at the market and found there were almost 50 different organisations dealing with homelessness in London—and we said, who's doing the best job and how are they doing it, what was unique about St. Giles also had a small operation where they were helping prisoners who were released from prison to get jobs. They would meet these prisoners at the door as they were released. While the state provided social housing, St. Giles would have corporates lined up to provide a job. They were working in two prisons, handling around 200 prisoners a year. Impetus started working with them and now they're in 22 prisons handling close to 3,000 prisoners a year. We used the business methodology to assess the potential market. What is the product or service that's being supplied? If you want to expand from two prisons to x-number, what do you need? This is the business methodology I was speaking about.
WINGS: So it's better for philanthropists to look at opportunities through a business lens.
DM: Exactly. I believe, "every nonprofit is a business." It has to have a product or service that it supplies to people, and the capacity for delivery, which means it has to have an organisational structure—accounting systems, IT systems. Looking at the NPO through a business lens they can make better judgments, which means more social impact. What VP looks at is active engagement, with high quality and committed management teams. We do a lot of investigation on the front end. It starts with careful selection of NPOs/social enterprises and determining an alignment of interest.
WINGS: How did the concept of venture philanthropy come to light?
DM: It's somewhat vague in terms of the origins. Credit’s given to one of the Rockefellers who came up with the specific term in about 1970. But you could also call it strategic philanthropy, or engaged philanthropy—the key attribute being very careful selection of high potential organisations. The founders of the EVPA and the AVPN are all out of the private equity/venture capital industry. I started in that in the 1980s. The second attribute after careful selection (and a lot of this is judged on the quality of the management team) is the quality of the product or service. The third is the potential to grow and provide products and services to more beneficiaries while maintaining or improving the quality of the outcome. We use the term capacity building. You're investing in the organisation itself. We weren't actually funding St. Giles to open up in a new prison. We were funding them to build their management team and training capacity, to improve their product or service. These VP relationships tend to be 3-7 years. That doesn't mean you wait until the end to see how it works. You implement key performance indicators to let you know you're on track.
WINGS: According to the National Venture Capital Association, "venture philanthropy applies venture capital strategies, skills, and resources to charitable giving. It focuses on leadership, bold ideas, developing strong teams, active board involvement, and long-term investment" . And Wikipedia says VP is characterized by "willingness to experiment and 'try new approaches'; focus on measurable results; giving financial, intellectual, and human capital; focus on capacity building, instead of programs or general operating expenses" . Are these on point?
DM: I would add to the NVCA description that it's important to emphasize the value of the human capital working alongside the financial capital. For Wikipedia I would take the second sentence and say, "...willingness to experiment and 'try new approaches'; to support innovation and to support replication.” People around the world are reinventing the wheel because there's no easy way to share knowledge and best practice.
WINGS: The sector is pushing for more transparency and looking at new ways to explore 'big data' and collaboration. What’s your solution?
DM: For us it is building a common platform which encourages people to work together, share knowledge, ideas and best practice because they have common interest. The challenge is how to get information to the places that could benefit from it the most. I'm talking about something that's going to take many years to build. I'm not exactly sure where it will go but I do know the basic principles of knowledge sharing, collaboration, capacity building, replication—all of those things are going to be keys to success and we're just going to improve on them as circumstances permit. We need major funders to get engaged and help us build out the eco system.
WINGS: You say risk-taking "enables philanthropic efforts to be more innovative and explore new solutions to social problems." Why is lack of collaboration so pervasive across the sector?
DM: There isn't a natural place for different types of groups—philanthropy, private equity, chambers of commerce—to come together. That's one of the reasons the market is very inefficient. Business has this particular skill set but knows very little about the social sector. So you need to have close collaboration with foundations and with governmental entities that understand the social sector. On the other hand, the foundations and governments are not necessarily skilled in these business practices. These are all intelligent, committed, hardworking individuals but this is just outside their skill set. You've got this constant tension between all of the things you want to do and what the commercial realities are. At the same time, people are coming to realise that human capital is extremely important. You can't just invest capital in addressing social problems; you have to invest in a smart way. And the smart way is enhanced substantially by having the right people engaged. That's where corporates can play a big role. There's a lot of scope for collaboration and I think we're just scratching the surface. Philanthropy can take risk, because you can see something and experiment.
WINGS: Should non-profits be focusing more?
DM: Certainly, because whether you're a nonprofit or a business or an individual, you have to know where you're going before you can figure out how to get there. Even before that you have to know where you are now. What we tell people is, pick your sector with your heart. What is your passion? Let's say it’s the environment. That's pretty big. Is it global warming? Is it water? Waste recycling? The narrower you make your focus, the more you can learn about the chosen sector. Then find people you can collaborate with and learn from their expertise. One of the things we're doing is trying to break silos, but we're also trying to facilitate formation of groups with common interest so they can cross-fertilize and network more easily.
WINGS: The inaugural AVPN Conference is coming up on May 9 -10 in Singapore.
DM: There are three main themes. One of them is the interface between philanthropy and impact investment. Philanthropy can help build up organisations, which later when they’re more sustainable and are more robust in terms of management, products and services, they can potentially become investable from the perspective of impact investment.
The second theme is around engaging with government. This is critical because government is not only the biggest funder but they also set the rules and regulations. We are seeing much more government interest in the VP model.
The third theme is around knowledge transfer between US, Europe and Asia and then across Asian countries. We want to promote venture philanthropy as an effective way for innovation, scaling and replication.
We are very pleased to be a member of WINGS and look forward to more engagement with other members, and would love to welcome them to our conference.