Private Equity Foundation, UK and Germany

Founded in 2006, the London-based Private Equity Foundation (PEF) very quickly positioned itself as an important venture philanthropy fund in the UK. Its volume of financial investments reflected the success of its backers in a period of economic boom.

In 2007 it decided to start a European expansion of its activities since most of the 70 private equity firms and their advisers that were backing the foundation work not only in the UK but all over Europe. Germany was interesting to PEF because its apprenticeship system and extensive experience in school-work transition programmes provided some unique policy and civil society solutions in its core funding area, supporting so-called NEET students (young people not in education, employment or training). PEF’s investments in Germany have been carried out in partnership with the Berlin-based donor support organization Active Philanthropy.

Michael Alberg-Seberich, Active Philanthropy

‘When the going gets tough the tough get going…’ Do you still remember that song by Billy Ocean from 1985? I was repeatedly reminded of it when Active Philanthropy started working with PEF on investments in Germany in 2008. Our cooperation began with searching for a charity that PEF could support. The selection process ended at a time when some banks had gone bankrupt and many private equity firms were seeing their fortunes crumble and the stock market crash.

Nevertheless the investment was made – in the Hamburger Hauptschulmodell. For them, the PEF investment came at the right time. The charity coaches mainly socially disadvantaged students in Hamburg to increase their chances of getting an apprenticeship. The CEO of the organization, Michael Goedeke, says: ‘Seeing the stock market crash you are glad to see a foundation going ahead with an investment. This is especially true if the funding comes from a new player in the field.’ Two other investments have followed since.

When the financial crisis hit, PEF's backers were not exempt.  However, although PEF’s 2008-09 fundraising run was affected, it proved more resilient than many had thought possible and the board continued in its search for new investments in Germany. The financial crisis was seen as an opportunity to underline PEF’s commitment to NEET students.

For me, this active stand was not always easy. While many charities in Germany initially responded enthusiastically to the new player in the field, they became unsure when they realized that the money originated in the private equity industry, which, as part of the financial system, had been affected by the crisis. Other charitable organizations had doubts about whether such an industry foundation could actually be reliable and a long-term supporter.

Dr Hanns Ostmeier, President of the German Private Equity and Venture Capital Association and a member of PEF’s German steering committee, underlines that PEF in Germany at the end of 2008 needed to do the leg-work to develop lasting partnerships with charities in the spirit of venture philanthropy. The result of this was investment in two further charities, beginning in September 2009.

Michael Stenger, CEO of the Munich based SchlaU-Project, a school for unaccompanied minor refugees, was initially suspicious of PEF. At our first meetings, he wanted to know everything about these people in suits in London who were interested in supporting him in such difficult times. PEF was able to answer his questions and has started to help him to develop a business plan for the expansion of his extremely successful school.

Sandra Schürmann, founder and CEO of the Projektfabrik, and COO Simon Rieser had previously mainly received public money for their work with unemployed young people. For them, the relationship with PEF opens up new financial resources at a time when public funders are asking for matching financial support from other funders. PEF allows the Projektfabrik to explore new income and quality management opportunities, like a training programme for multipliers in the methods that the Projektfabrik has developed. The investment opens up opportunities for it to become even better at what it does. This means even more help for NEET students.

As an industry foundation, PEF is not – at least in the German context – a typical philanthropic venture. The example of PEF nevertheless shows how the financial crisis can be used as an opportunity to explore a new market and maybe even achieve more with less. Maybe this is why I am still humming the Billy Ocean song: ‘I’m gonna put this dream in motion / Never let nothing stand in my way’. PEF’s investments in Germany are so far no more than €200,000 over a three-year period for each charity. PEF expects that these investments will support the integration of over 6,000 students into the German job market and give them a chance to reach their full potential, and fulfil their dreams.

For more information
Contact Michael Alberg-Seberich at alberg-seberich@activephilanthropy.org or Rosie Davey at rosie@privateequityfoundation.org, or visit www.privateequityfoundation.org or www.activephilanthropy.org.