Aug 7, 2018 in Research

Introduction

Social venture funds are a form of investment that lies between businesses and charities. As such, it may not be easy to differentiate a social venture fund organization from a business enterprise or a charity organization. Moreover, even among the social venture fund organizations, there are many distinctive areas such as types of funding that can make them appear different among themselves (Malik 4). The paper analyzes the Social Venture Partners (SVP) Boston as a social venture fund organization by exploring the types of funding, industries involved, companies it supports, geographical area it serves, and stages of business at the organization.

The world of social venture funding is driven by the need of social venture capitalist to provide solutions to environmental and social challenges. Many social venture organizations focus on the return on investment to invest in the future. As a result, they utilize the power of capital rather than capital itself to initiate activities that have positive impacts to the society. The SVP Boston is a diverse community of people around the world that invest time and money in nonprofit organizations concerned with the success of children and adults in a school. The community prides in a rigorous investment program that allows the members to have an impact to the society collectively rather than people working individually.

With more than 2700 members around the world, SVP Partners drive their venture through capital and services. Each member contributes a minimum of 5,500 dollars per year besides offering professional expertise and time to nonprofit organizations. The selection of organizations to invest in is carefully done based on their mission so that SVP Boston can enable them to achieve their goals. Through direct involvement, SVP Boston is able to ensure that its connection with the organizations that its support remains strong. Also, this enables it to meet its philanthropic mission of contributing to Boston community development (SVP Boston Website).

SVP Boston provides support to nonprofit organizations in the following areas:

  • Performance management--the organization is given strategies through professional advice on how to manage their activities and achieve the highest standards of returns
  • Leadership support-- SVP Boston emphasizes on good leadership in nonprofit through advice and training
  • Growth planning-- the firm invests time in the nonprofit to develop plans to achieve identifiable objectives of the organization and have the greatest social impact in the area of education

Types of Funding

Social venture funds always have an investment strategy that they use to do their investment. The strategy is often described as the organization’s theory of change and varies from one organization to the other. However, many social venture funds are not so much disciplined to have a clearly defined investment objective. As such, most of them will jump on an opportunity whenever it arises. In most cases, such organizations do not have a formal track record of the social impact to the community they are working in. Therefore, many social venture funds only seem to be satisfied with the early stages of investment and leave the rest of the activities to be run by the organization (SVP Boston Website).

The majority of social venture funds employ the use of a full range of funding options. They include debt capital with the right to participate, license fees, and mezzanine financing that gives the fund a quasi equity. The debt capital is the most preferred option for many social venture funds. Such form of funding allows the funding body to support the business model that is stable while retaining the capital invested (Walker 22).

In most cases, debt capital comes with a combination of a share in the success of the investee inform of a loan capital. SVP Boston is involved in the building of the investee through volunteer in identified areas that can enable the organization to reach its highest potential. For instance, SVP Boston provides a three year operational support of professional staff who are enthusiastic about developing small and upcoming organizations. The investee must determine the areas that are likely to create more impact to the operation of the organization and experts from SVP Boston come in to give advice.

The organization also provides tools to assess the capacity of the organization to reach its full potential. The areas that are assessed and supported include management of finance, communication, and board governance. The fund works in partnership with the investee in all areas that make up the organization. Equity investment is also a form of funding at SVP Boston where minority stakes of management are supported through supervisory activities. In this form of funding, investment with other funders is encouraged, and in most cases preferred where there is a clear exit such as through a trade-sale (Lenkowsky 2).

The SVP Boston consist of a group of business executives, professionals and entrepreneurs who promote venture philanthropy to bring about the positive social change in Boston and around the world. The partners drive the work of the organization based on the approach that promotes philanthropy by forming a partnership with nonprofit organizations. The purpose is to donate their financial resources, time, and expertise as catalysts for capacity building, growth, and sustainability in the organization. The organization considers its donations as investments and thus uses its resources to maximize the social value of their investment (Lenkowsky 3).

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The organization has two missions that form the basis of its selection of nonprofit organizations to invest in. The first mission is to connect investment making and philanthropic work of each partner, so that each is given the opportunity of participating in the work. The second is the modeling of venture capital investment that gives partners greater opportunities to get involved in the running of the organizations that are supported as well as initiating learning activities for those organizations.

Unlike other social enterprises, SVP Boston has the aim of achieving positive social change and philanthropic practices in Boston and other regions where it has networks. The organization does this through support of nonprofit organizations with expertise and collective capital investment. Its aim is to ensure that the capacity of investees is strengthened through guidance and grants in areas of finance, marketing and strategic planning, and organizational management (SVP Boston Website).

It is achieved through different learning and educational forums to promote engaged philanthropy between its partners and investees. The organization also lays a ground for investors to support nonprofit organizations with securing long-term investment. Its funding program is based on donor-advice provided at The Boston Foundation (Childress 12).

Geography

SVP Boston, founded in 1997, is a local and global organization that has its philanthropic work stretching across the world. Its aim is to invest money, professional skills, and time in helping nonprofit organizations to achieve their missions. It has a global partnership of over 2700 philanthropists and a global network of change-makers and entrepreneurs. It has enabled it to share its common ideals in different areas that are aimed at making young adults and children get the best out of their education.

SVP Boston supports the idea that small organizations can tap the knowledge and experience of professionals through city-forums and other platforms to grow their vision. As a global organization, SVP Boston works in collaboration with network member organizations from Boston to Bangalore. SVP Boston is supported by the SVP Network Office that acts as a hub to link member organizations to partners. Also, this allows them to come together and share experiences on the use of funds or other resources provided by the SVP Boston (SVP Boston Website).

Industry and Support Principles at SVP Boston

SVP Boston works in a multiplicity of industries with a community of experts and philanthropists focused on transforming the community in Boston and around the world. The model at the organization is built on high impact philanthropy that encompasses skills and money investment. With direct investments totaling to a million dollars, the focus is on the effective and innovative nonprofit organizations that are able to generate 3 times what is invested in them.

It is done through business expertise and volunteer support to any innovative organization in the area of education, family economic efficiency, and workforce development. The selection of the organization to receive support is based on the three areas together with proved strategic and business plan. Strong public relations and marketing, revenue development, human resource management, evaluations and outcomes, etc are among the areas in an organization selected where SVP Boston renders its support. The aim is to enable investees achieve measurable and outstanding results from their investments.

The SVP Boston has guiding principles that determines the organizations that receive supporting and funding. Investment in all organizations is guided by the uniqueness of the organization to support education to young adults and children at the community level. However, such organization must indicate that they have strong leadership and viable programs that can lead to the organization achieving sustainability. The support also must help the organization to expand its ongoing efforts, increase effectiveness, and contribute to the improvement of the community where it works (Salamon55).

Another factor which is put into consideration is the size of the organization since the organization soliciting support must be sufficient enough to benefit from the partnership with SVP. It means that SVP Boston does not support a person or a group of people with no staff to design and implement projects that are aimed at capacity-building. On the other hand, highly organized nonprofits that have access to other capacity-building resources cannot qualify for the support from SVP Boston.

Among the requirements to qualify for investment from SVP is an annual operating budget of between 500,000 to 2 million dollars, 2 to 2 staff, with one having several years of tenure, the organization must have been in operation for at least 3 years with some measurable results, and an organization board with defined roles and responsibilities and regular meetings.

Also, the firm identifies nonprofit organizations such as InnerCity that have identified capacity-building need in their leadership and given it a priority. Capacity-building is a key element that SVP Boston seeks to build through investment of professional advice. The investee must thus have committed to use their resources and efforts to focus on developing internal structures that can help to achieve its goals. The other consideration is the development of creation of meaningful opportunities in organizations that work in the area of interest of the firm (SVP Boston Website).

The resources are invested in terms that go beyond financial resources through a three year time and financial commitment to develop the opportunities as well as help in achieving the set goals. The ultimate goal remains to be that of seeing the nonprofit organization being able to improve their strategies through meaningful approaches such as effective management and marketing strategies. SVP Boston also bases its evaluation of an organization to support through measurement of performance and outcomes. Organizations are required to have planned and well-developed programs to measure their performance and outcomes in transforming their community (Salamon 67).

Stages of Business

Most philanthropic venture firms are focused on funding social entrepreneurs with a specific objective in the United States. The first consideration that SVP Boston considers is whether the nonprofit to be funded operates in the area of its interest like education to young adult and children. The social entrepreneur must also be registered under the U.S laws or the laws of the country of origin as a nonprofit organization. As such, SVP Boston does not provide professional and financial support to organizations that are registered as for profit as well as those of a hybrid entity (those that are registered as partial for-profit and partial non-profit organizations) (Chen 134).

Additionally, the organizations that are considered must also not have any strong financial resources or sources of other technical and professional support, but which has the potential to achieve its mission to transform the community if it is empowered. SVP Boston focuses on the potential of the nonprofit to bring about positive social impact. It is measured through performance of the leadership and staff, and also the outcomes of their activities to the community. In many social venture firms, this will vary depending on the investment type and the portfolio of the organization. Many venture capitalist firms use the social impact as a measure of the outcome rather than the return on investment, which is commonly used in many for-profit organizations. Also, some uses the money that is saved from the activities that the investee has involved itself into as a measure of the social impact of that organization (Stevenson & Wei-Skillern 17).

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As a global venture firm, SVP Boston has adopted the international mode of support to investees that qualify its criteria. The firm has opened network centers in the cities where it has partners with the purpose of coordinating its activities near the organizations. It also focuses on social enterprises as opposed to charities. However, the social enterprises must purely be for non-profit purposes. Some social enterprises are also partially for profit and therefore cannot qualify for the investment from SVP Boston (Stevenson & Wei-Skillern 17).

Moreover, SVP Boston differentiates its investment into financial, time, and expertise investments. All the services are provided for three years after which the organization is expected to have developed strategies to achieve its goals or even achieved some of them. SVP Boston financial support is not considered as a grant but an investment that must translate into growth in the targeted departments in the organization. The firm provides financial support to social enterprises and therefore must access the detailed reports about the previous performance of the organization. After the support is granted, SVP Boston continues to monitor the performance in the organization so that a report is also provided at the end of the three year period (Rossman, Appleby & Caitlin 23).

Among the information that is included in the report includes the management structure at the organization, whether the organization has a tenable leader or manager with several years to work, and the performance history of the organization. The final report details the use of money and the evidence of the social impact that their finances have helped to achieve. Since SVP Boston is concerned with good management and accountability as well as professional management of the organization, it is easier to maximize the support resources that the firm gives to the nonprofit organizations (Chen 137).

SVP Boston does not require the organization to be supported to be primarily located in the home country. It was changed after the firm went global. The firm was mainly established to serve the Boston community. However, the majority of the organizations that have been supported come from Boston community. The organizations to support also must serve the end-beneficiaries directly. Organizations that deal with advocacy coalitions, foundations, funders, among others cannot qualify to get support from SVP Boston (Bannick & Goldman 1).

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