Venture Philanthropy In Alberta
Alberta charities weary of chasing donors and dollars are seeing “venture philanthropy” as the key to self-sufficiency. Is it really the gift that will keep on giving?
by Jennifer Cockrall-King
“We hear back from all of our investees that the money is nice but the time is invaluable. We’re scaling up operations that are already out there. We’re making them more efficient, more effective. It’s really the leading edge of philanthropy right now.”
This type of partnership has been on Sheila Carruthers’ radar for about five years, but she wonders why it has taken so long to catch on in Alberta. Carruthers’ Calgary-based CSR Strategies Inc. specializes in integrating socially responsible strategies in Alberta’s business and non-profit cultures. “It’s just like the micro-credit revolution in the developing world,” she says, “just closer to home and with bigger dollar amounts.
“It’s new, so it takes a lot of dedicated people to get to that tipping point where it is accepted as a good financial model. It’s not just financial modelling, but truly understanding social need as well,” she speculates. “And of course, in a recession, people’s good intentions are not always going to be realized when they first have to batten down the hatches and stick to the core investment strategies that have always been in place.”
Some market watchers, though, approach this new model with more of a cautious eye. “There are challenges to venture philanthropy,” warns Gary McPherson, executive director of the Canadian Centre for Social Entrepreneurship at the University of Alberta School of Business. “It depends on how many strings are attached. Sometimes the people who are giving the money might have too much influence on how it is used.”
Moreover, McPherson mentions that the returns on investment for most social enterprises looking for investment are less than what a venture capitalist would expect in the general market. He certainly thinks it’s worth a potential venture philanthropist’s time to turn a critical eye towards any social enterprise startup looking for venture capital.
“There may be a few home runs out there, but they are few and far between,” he says. “It’s certainly not the norm.”
Then there’s the worry that venture philanthropy and social entrepreneurship can lead to just another capitalist venture in philanthropic robes. This is where the idea of adding an actual financial return on investment comes in. And whether you see that as a clever way to attract investor-donors or as a complication of morals or ethics, it’s the backbone of Alberta’s newest and perhaps most aggressive venture philanthropy model. Venturion Inc. is an unapologetically for-profit concept that is selling itself on its plan to pay both investors and participating charities. It launched in Calgary in 2008, and its website and marketing materials trumpet the ambitious mission to double investors’ money and create $200 million in capital for charitable funding over the next four years.
“I’ve always said that people can make just as much money investing in homeless shelters as shopping centres,” says Venturion COO Steve Chapman. Instead of homeless shelters, Venturion’s investors buy art: original paintings from the company’s collection. Investors own the work outright, but Venturion licenses the right to make prints on a large scale from the art. Charities across North America can then make use of their volunteers as a sales force to lease these prints to major hotel chains, developers, restaurant chains and other businesses that tend to need art prints in bulk. The idea is to create an ongoing revenue stream back to the original investors and charities, while the print-buyers get something they would normally need anyway.
“We started with a concept of maximizing dollars for charities,” Chapman explains. “We created the business around the charity-giving model.”
As a former City of Calgary police officer and having run for Calgary city council, he felt social problems needed to be approached in a more aggressive way. “It’s a go-big-or-go-home undertaking,” he says. Indeed, its success will depend on millions of dollars of front-end investment, plus economies of scale at all levels to maximize profits for all involved. He concedes that in the time between the launch and the recession that hit shortly thereafter, Venturion has scaled back its target from $200 million in revenue to “$50 to $100 million.” He won’t divulge how much capital Venturion has raised, but says they’re “almost there,” referring to the startup investment from investors. By next year, Venturion hopes to have all of the capital investment in place, and estimates that the business model will be “active in 18 to 20 cities in North America, working hand-in-hand with about 100 different charities.” On average, he estimates that each charity will be making $20,000 to $30,000 per month.
Even if it all sounds too good to be true, Chapman makes no apologies for considering this radical form of venture philanthropy the best solution to social problems. “I’ve always believed that if you want to solve any social problem, or any problem for that matter, put 10 entrepreneurs in a room and challenge them to make money on it. Our slogan really sums that up: Make a profit while you make a difference.”
Clearly, Alberta’s venture philanthropy frontier is still a Wild West of competing ideals and models. While SVP Calgary banks on the value of delivering social dividends through its investees, Venturion intends to turn risk-ready investors into accidental philanthropists. But even if the latter remains untested and unproven, SVP so far has established that a new philanthropic outlet, one that allows for increased donor involvement and the creation of self-sustaining charities, has a place in Alberta. And as proof that such organizations can thrive look no further than Earth Water International Inc., a bottled water company started in Edmonton and that gives 100% of its net profits to the United Nations Refugee Agency and now has operations across Canada, in the United States, Netherlands and Portugal.
Nonetheless, the ethical and philosophical debates around revenue generation amongst the charitable set will likely swirl for quite some time. To the countless non-profits currently forced to appeal to cash-strapped givers, however, that debate doesn’t mean so much. Rather than accept the need to compete for attention and money, Carol Kelly will continue her search for an engaged investor who will see the value of helping her get the Medicine River Wildlife Centre out of survival mode and into a thriving, growing business mode. And if she succeeds, she’ll finally be able to hire those four more full-time staff she so desperately needs.
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