Friday, August 3, 2007

Raising Venture Capital for Philanthropy

I previously wrote about Homeward Bound's IPO -- not an Initial Public Offering, as it is known in the corporate world, but an "Immediate Public Opportunity ... to end homelessness." Up to 200,000 "fundraising shares" have been made available at $32 each.

The first share was famously purchased by Warren Buffet.

They are calling this the "first-ever charity IPO" . . . but this actually builds on efforts previously launched at other organizations, such as College Summit. For example, see this April 2006 story in Fast Company about a "private placement" that raised $15 million from 10 investors to support the organization's growth:

Next: A Nonprofit IPO?

Locally, you can read about the efforts of George Ellis in a recent Philanthropy World Magazine. Ellis helped "introduce venture philanthropy to Dallas." He has been critical in the growth and expansion of the Entrepreneurs Foundation of North Texas, led by one of the strongest Executive Directors in our community (Pam Gerber). Ellis and Gerber are working to help companies "do well by doing good," and their perspective on philanthropy builds directly on the work of the venure capital markets.

In fact, you can hear an interview with Pam Gerber here:

Philanthropy World on MN1 []

At CDM, we've been discussing how to apply these principles to our work. We've made a great deal of progress over the past year, thanks in great part to the work of Karen Waller, Teresa Hiser and our friends at the Dini Partners (who have been advising us on the development of our ongoing capital campaign).

These concepts are not new for such campaigns. However, we are now thinking beyond the simple construction of the building, and to the significantly expanded operations that we will inherit once the buildings are complete. We find ourselves asking:

  • How can we possibly ramp up our revenues by 50% over the coming years simply to handle these expansions? (not including the other organic growth that will occur in our other programs)
  • We do not currently have an endowment -- is there a role for such a funding vehicle within our organization? How could we build it, while the demand for funds is so tight and the organization continues to grow at 25%+ per year?
  • Instead of an endowment, is there a way to amass a large amount of "working capital" that we can use to fund our existing operations while refocusing our fundraising energies on the capital campaign?
  • How much will our social enterprise program be able to contribute through its resale operations and car auction program? Will these efforts even be generating a positive cash flow by the time these expansions arrive?
  • What do our donors -- particularly donors to our capital campaign -- expect of us in terms of expanding our annual fundraising? Are their own commitments going to grow along with their expectations, or are they simply wanting us to find new sources of support?
  • How can we move beyond the day-to-day, keep-the-lights-on mentality towards a longer-term, strategic perspective on fundraising?
  • What would a donor need in order to consider a sacrificial, major gift to be used in an unrestricted way to expand our work?
  • Is there a way to build a case for significant, multi-year commitments from donors?
We are not sure if this is venture philanthropy or simply effective fundraising. Whatever we call it, we understand that our current practices must change and we must adapt to the changing needs of our high-impact investors.