For the 2011 fiscal year, the European venture philanthropy practitioners surveyed in the European Venture Philanthropy Association’s (EVPA’s) second annual industry survey reported significant increases in the amount of financial support they provided to investees. They also showed an increasing predilection for the use of equity and debt instruments.
The survey is the most comprehensive so far undertaken of this evolving ‘industry’, of which foundations represent around two thirds of the 61-strong sample. Since they began using the approach, respondents have made around €1.4 billion in venture philanthropy (VP) investments. In the fiscal year 2011, they provided investees with €278 million of financial support, a big increase on the previous year’s figure of €189 million.
In addition to venture philanthropy, respondents use a range of definitions to describe their activities – impact investing, social venture capital, social investment, and so on. About half the respondents seek a social return first and a financial return second, whereas a quarter seek a social return only, and a quarter place social and financial return on an equal footing. This is a change from the previous year’s survey results, as more respondents seek financial returns in addition to (but not prioritized above) social returns.
The survey reveals that VP organizations have become more sophisticated in their use of the entire range of VP ‘tools’ to generate greater societal impact. Of particular note was the variety of financing instruments used. There was a significant increase in the use of equity and debt. Interestingly, even for foundations and other non-profits, the financing instrument most commonly used was debt, with grants and equity in equal second place. This suggests that recycling funds is increasingly important in times of resource scarcity and that tailored financing is becoming a reality. In addition, the value assigned by respondents to issues such as impact measurement (94 per cent measure social impact), due diligence, co-investment, effective non-financial assistance and exits underlines the continuing value of EVPA’s focus on best practice and its collaborative approach to developing the sector.
This article was originally published in the March 2013 issue of Alliance magazine, which contains a special feature titled Markets are emerging: what about philanthropy?