Case study of a venture philanthropy partnership: setting the scene

In September 2005, Impetus Trust, the UK’s first venture philanthropy fund, and CAF (Charities Aid Foundation) launched a pioneering investment collaboration. This was Impetus’s fifth investment but their first co-investment. It was CAF’s first collaboration with another funder through their Collaborative Fund.

The organization selected to invest in was Naz Project London (NPL), which provides sexual health and HIV prevention and support services to Black and minority ethnic communities. NPL will receive a total of £275,000 core funding over four years, but what else will it receive in the way of support? What does a venture philanthropy investment really offer a charity? This article is the first in a series of three articles that will track the relationship between NPL on the one hand and Impetus and CAF on the other.

Naz Project London – background

Founded in 1991, NPL is named after a man called Nazir, who had HIV/AIDS and couldn’t access linguistically or culturally appropriate services. He was a Muslim and spoke Urdu. After his death, his carers founded NPL for Muslims and people from South Asia. In 1995-96, NPL became aware of the need to cater for other groups with similar problems. By 1997 they were also working with Spanish and Portuguese speaking Latin Americans, and three African language groups. Since then they have not expanded, feeling it is better to work in depth with a few communities than to spread their work too thinly.

NPL has two ongoing programmes. The biggest focuses on prevention and sexual health, while the second is for HIV sufferers. A third programme, which is not always running, involves research into the sexual health needs of Black and minority ethnic (BME) teenagers.

NPL before Impetus/CAF

Before the injection of funding from Impetus and CAF, NPL was at a critical stage in its development. Although the organization was growing and its profile had gone up, ‘without significant funding, it would have shrivelled’, insists NPL Chief Executive Bryan Teixeira. ‘Stagnation was not an option.’

So what does NPL want to do? Its aims are twofold, to expand within existing communities, especially among young adults, and to launch a peer education programme, based on research, with schools and youth clubs. This will also involve training for teachers and parents. With the rapidly increasing incidence of sexually transmitted infections and national efforts to tackle this issue more effectively, NPL is keen to expand its work with BME young people.

This will inevitably involve expansion of the staff team – which currently consists of six full-time and nine part-time staff. A full-time coordinator for peer education project will also be needed.

A perfect match?

This is just the stage in an organization’s development when Impetus likes to come in, when it has great potential to develop but needs substantial support to enable it to do so. According to the selection criteria published on its website, Impetus aims to support ‘charities that make a demonstrable, significant and sustainable difference to the lives of a substantial number of disadvantaged people’ which are ‘at a critical stage in their strategic development – wanting to make a step change – and with an outline plan of how they might achieve it’.

These charities might, for example, be at a point where they could grow significantly or where they are underperforming and seeking to turn around their performance. It is also crucial that the charity’s leaders welcome the distinctive investment package that is on offer (ie long term infrastructure funding plus capacity-building and management support).

Quality of leadership is a key factor for Impetus. ‘We are seeking leaders with the vision, energy, enterprise and determination they will need to motivate their teams and deliver the proposed step change,’ says the website. Finally, it is essential that Impetus feels it can add value, and in a particular way: ‘We want to support charities to address their weaknesses as well as to enable them to capitalize on their strengths.’

From CAF’s perspective, they want to work collaboratively and creatively with a small number of organizations through their Collaborative Fund: on one level collaborating with Impetus Trust and on another level employing their expertise in organizational development and their consultants network as well as funding to support an organization in a key stage in its development.

The Impetus/CAF package

In December 2004, NPL was invited to apply for the joint investment. Of the first five charities Impetus have taken on, three have involved some sort of introduction. In this case a shortlist was drawn up by CAF and Impetus, and two were invited to apply. Part of the appeal of NPL was that it works with BME communities. Impetus works only with charities with annual incomes of over £250,000 (and less than £10 million) and there are not many charities that large in the BME sector. CAF works with organizations with an income of up to £3 million a year. After four months’ due diligence, the investment was approved by Impetus and CAF in July. The formal relationship began in September.

CAF and Impetus will provide long-term core costs funding to help NPL make the changes it wants to make. The investment package will comprise a total of £275,000 core funding over four years, with Impetus contributing £175,000 and CAF Grants £100,000 plus the cost of 30 consultancy days. In addition to the funding, and integral to the venture philanthropy package, is some targeted capacity-building from both Impetus and CAF.

Why the partnership between Impetus and CAF?

CAF offers a mix of financial and consultancy support that is complementary to what Impetus offers. By combining resources from both Impetus and CAF, an investment package has been designed to meet NPL’s specific capacity-building needs.

A key part of Impetus’s role will be to leverage in pro bono support from its ‘associates’. Part of the Impetus ‘proposition’ is finding people from the private sector to work with charities. They have worked so far with about 20 associates. Some relationships are with companies and some with individuals. CAF will add support from their consultants network, all of whom are experts in charity consulting.

As part of the due diligence, NPL benefited from a comprehensive sector and competition analysis contributed by the strategy consultancy firm OC&C, which is an Impetus corporate associate partner. This process gave NPL a thorough understanding of their market and positioning, which has underpinned a revision of their strategy and helped to shape the Impetus/CAF investment.

Over the next six months at least, Impetus associates will be providing help with planning and marketing. The key task on the planning side is to work out how to roll out the new business plan over the next two years without overloading Bryan and his team.

On the marketing and public relations side, NPL has two key areas to address. The first refers to ‘some basic housekeeping issues’, for example standardizing the use of their logo. The second area is more strategic. The due diligence had shown that a large section of their target community didn’t know of NPL or understand that NPL had moved beyond its original focus on the South Asian community. The strategic marketing work aims to ensure NPL effectively communicates its broader position as a leading London agency for sexual health for Black and Minority Ethnic communities.

Support will initially come from CAF in two main areas, fundraising and premises. On the first, CAF is working with NPL and with the support of a CAF consultant to review NPL fundraising strategy; review NPL’s approaches to funding and resourcing in the longer term; appoint a fundraiser and work with the fundraiser to research potential funding sources; and establish a fundraising subcommittee – a substantial agenda.

The key issue with premises is whether to move or to renovate. NPL now has one central office and three satellite offices, with three more satellites planned. The plan is to continue having satellites but a larger central office will undoubtedly be needed as the team expands. The two options are to redesign the existing space or to find new premises. CAF has been able to bring in support from Ethical Property Foundation, another Collaborative Grant holder, to provide professional advice.

How the relationship will work

NPL will meet with Impetus associates and CAF consultants as needed throughout the four years of investment, but the backbone of the relationship between NPL and its investors is the regular monthly meetings between NPL Chief Executive Bryan Teixeira; Nat Sloane, co-founder and vice chair of Impetus; and Victoria Anderson, CAF Head of Grantmaking, where they will update each other on how things are going. Twice-yearly reviews to take stock of how things are going will involve NPL senior board members.

This series of articles

My plan is to attend one of these meetings every six months. About 18 months from now, a second article will look at how they are doing, the key challenges faced, how they have addressed them, and the lessons learned. A third article some time in 2008-09 will look at how NPL has fared in partnership with Impetus and CAF, reviewing progress both against initial goals and expectations and in light of mid-term progress.

What do I hope to achieve by this? There's a lot of hype about venture philanthropy still – and a lot of questions still being asked. I attended a seminar recently where a group of very thoughtful foundation grantmakers all expressed the view that what a venture philanthropy fund offers isn’t really that different from what they have been doing for years. Another issue raised is whether non-profits find so much involvement in their operations intrusive. The more cynical might suggest they are just in it for the funding and more or less putting up with the capacity-building side of things.

I hope that becoming involved in the day-to-day relationship in this way, and talking regularly with those most centrally involved, will enable me to convey a flavour of what a venture philanthropy fund can offer a charity and how the charity feels about the whole package, as well as a more objective summary of what was achieved. This will of course be a case study of one particular investment relationship, with no claim to any broader ‘truth’.

The first meeting

My first meeting on 6 December was their third meeting. The agenda was structured round a chart for recording progress in all areas, including financial inputs, planning, marketing, fundraising and premises.

‘Financial inputs’ was, not surprisingly, the most straightforward item: the expected funding had all come through, both from CAF and from Impetus. The initial funding will be used to hire a new prevention services manager and fundraising manager. Both were identified as capacity gaps for NPL.

On the capacity-building side, it is already beginning to become clear what will be needed if the NPL/Impetus/CAF partnership is going to work. Impetus and CAF are providing people with experience in key areas. The question is marrying the experience with effective delivery. Since Bryan runs a small organization where his time is at a premium, he values speed of impact. Where consultants get up to speed fast, starting from where the due diligence left off rather than going back over ground that has already been covered, offering ‘concrete recommendations’ rather than ‘things I already know’, Bryan is happy with the relationship. ‘There’s no doubt of the value,’ he says. Where things are going more slowly, he is ‘not convinced of the value’.

The effectiveness of the capacity-building support is certainly an area we will track during this case study since it is at the heart of the Impetus/CAF offer and a key area of potential value for NPL.

Measuring results/outcomes – ‘our weakest link’

A key aspect of any venture philanthropy partnership will be measuring progress. How this is to be done is a major issue for Bryan, and one that he came back to several times during the December meeting. Two criteria are currently being used to measure NPL’s performance, ‘Lives touched’ (ie how many people are actually reached by the programme) and ‘Growth’. ‘Lives touched’ is a criterion that Impetus uses for all its partner charities; quarterly measures are asked for. Figures on both measures were fine. The growth forecast still seemed to be realistic, and the ‘Lives touched’ targets were also realistic and being met.

But Bryan feels it is urgent to develop better outcome measures that really begin to measure impact. Monitoring of outputs through the ‘Lives touched’ measure is OK, he says, but ‘What impact are we having?’ ‘This is our weakest link,’ he reiterates. ‘We don’t have an organizational picture of how we’re having an impact. We’ve just got pieces.’

In the due diligence process, NPL, CAF and Impetus had identified the whole issue of measuring performance as a crucially important area to address. The original timing for working on this was during NPL’s 2006-07 year. Bryan and Nat agreed that this would be an overriding priority to tackle early on in the year.

Need for flexibility

The need for flexibility in the relationship between NPL and its supporters was underlined in the brief discussion on mapping out milestones for 2006-07 programme objectives that ended the meeting. (Priorities were set for 18 months following the due diligence, but detailed priorities only for six months. The next set will be for a year.)

The mapping process, involving Nat, Victoria and Bryan, will be completed by April 2006. The process starts with Bryan. ‘Here’s where we are, here are our priorities.’ If Impetus and CAF disagree, there will be discussion. Once the programme objectives are agreed between the three of them, they are agreed with the board chair. But flexibility is crucial and ‘they can be adjusted as organizational needs change’.

For more information see www.naz.org.uk, www.impetus.org.uk and www.cafonline.org