Josh Yates on ‘Unlocking the benefits of venture philanthropy’
The lecture was given by Dr Josh Yates, Executive Director, Belmont Innovation Labs for Social Impact at Belmont University in Nashville, United States. Josh has two decades of academic research, community development practice, and social entrepreneurship to advance the cause of evidence-based social innovation to help regions thrive.
Pallavi Menon (MSc Evidence-Based Social Intervention and Policy Evaluation, 2022) reports:
In his talk, Dr Josh Yates elaborated on the concept of venture philanthropy to address the powerful question, ‘Does philanthropy have an evidence problem?’. To answer this question, Dr Yates put forth three main arguments:
The world needs a special approach to capital, which can be offered by venture philanthropy
There is a considerable amount of existing philanthropy that can be leveraged to provide the needed capital
We can work collectively to address the real and existing barriers to implementing venture philanthropy
Having worked both as a scholar and a social entrepreneur, Yates explained that his experiences across a variety of contexts repeatedly led him to three key questions, ‘What does it mean to thrive?’, ‘What does it take to thrive in today’s world?’, and ‘Who gets to thrive?’. He explained, ‘there can be no thriving without generating pathways that dignify people with good jobs and stable incomes. These pathways, when made sustainable, generate intergenerational and community wealth.’ Venture philanthropy thus becomes the key to revealing these pathways.
At this point, one begins to wonder, how is venture philanthropy defined? While there are numerous definitions online, Yates outlined it as ‘a high engagement approach that combines both financial and non-financial resources to deliver greater social impact’. As opposed to traditional philanthropy, which invests in programs serving immediate needs, venture philanthropy invests in organizations addressing root causes or systems-level issues. Additionally, traditional philanthropy tends to focus on measuring activities and outputs through grant-only (non-return) activities and garners low engagement from the philanthropists themselves. On the other hand, venture philanthropy measures outcomes and impacts through both grants and investments and tends to invite high engagement from philanthropists. Viewing this on a continuum of capital, venture philanthropy extends the toolkit from grant-making and output-only activities to other revenue-generating activities that generate social impact.
Yates described venture philanthropy as a bridge from traditional philanthropy to impact investing. Two prominent examples of this are purpose-related investments and mission-related investments. Notably, Yates drew attention to the notion that venture philanthropy is not a novel idea and was ranked as the ‘fifth most promising trend globally’ as early as 2015. However, he argued, despite some contention, that venture philanthropy is not a ‘fad that has run its course’ but an important concept as we forge ahead.
Throughout his lecture, Yates offered prominent and inspiring stories to support his arguments. Most of these stories were drawn from the work of the Transformational Business Network (TBN). His first story was that of Agape Connecting People from the TBN Asia network. Agape is a social enterprise based in Singapore aimed at connecting ex-offenders and people with disabilities to jobs with dignity. Agape was started as a call centre in Changi Prison by an ex-offender, Anil David. Over a decade, Agape achieved a recidivism rate of 2% amongst their employees (compared to the average of 20%), succeeded in opening another call centre in a women’s prison and operated a National Mental Health Hotline during the height of the COVID-19 pandemic. Applying the lens of venture philanthropy, Agape’s work became a success due to high engagement with philanthropists and local leaders, its leverage of blended finance (philanthropic, public, and private), and patient and persistent capital. Essentially, venture philanthropy transformed Agape into a self-sustaining social enterprise.
Special Approach to Capital
Following the enlightening story of Agape, Yates introduced his first argument, that the world needs a special approach to capital. Venture philanthropy is uniquely positioned to offer this approach through three talents: the power of strategic capital, the power of catalytic capital, and the power of tenacious capital. Each of these powers of venture philanthropy addresses particular challenges.
The first challenge that Yates highlighted was the compounding nature of our problems. The issues of war, climate change, recession, and biodiversity collapse among others that plague our world do not exist in siloes. We need an approach that addresses these issues as interconnected and this is where the power of strategic capital takes centre stage.
Power of Strategic Capital
The power of strategic capital enables innovations at the systems level. Specifically, venture philanthropy, compared to public and private capital, can be more agile, pioneering, exploratory, risk-tolerant, and more focused on solutions that connect systemic leverage points for outsized impacts. To illustrate this, Yates cited the revolutionary story of SANERGY, a sanitation collaborative based in Nairobi, Kenya that has worked to convert human waste into environmentally sustainable, high-protein animal feed. Venture philanthropy enabled scientific research and connections between different enterprises to ensure the success of this project.
The second challenge that Yates proposed is that of the $2.5 trillion annual gap in Sustainable Development Goals (SDG) financing. He argued that the power of catalytic capital can mobilize an entire continuum of capital to address this.
Power of Catalytic Capital
This power of catalytic capital focuses on unlocking and enlisting private and public capital. Yates elaborated that venture philanthropy enables investment in early-stage enterprises and de-risks follow-on investment by providing ‘first loss’ capital. Additionally, venture philanthropy can catalyze blended finance solutions for long-term sustainability. To illustrate this, Yates provided the example of Lisa Kimbo from the South Lake Medical Centre in Kenya, who worked with partners like Johnson & Johnson to provide affordable healthcare for the low-wage flower farmers in the surrounding Naivasha district.
The third challenge that Yates drew our attention to was ‘the missing middle’, which shows that there is unrealised potential for the reallocation of labour across firms. Particularly in low-income countries, there are few large formal firms and many small and informal firms that lack growth. However, the key economic engine providing good quality and stable jobs comes from small- and medium-sized enterprises, which are often unfunded in low-income countries. This is where the final benefit of venture philanthropy comes in: tenacious capital.
Power of Tenacious Capital
The power of tenacious capital spotlights patience and persistent partnership for the long haul in challenging contexts. Venture philanthropy is set up to invest over long-time horizons, persist in adverse conditions, and walk alongside in genuine partnership. Yates elucidated the story of Kim Tan who persisted over two decades in the Kuzuko Game Reserve in South Africa to create a home for over forty endemic mammal species, including ‘The Big Five’, and create significant employment opportunities for residents.
Leveraging Existing Philanthropy
The second point of Yates’ argument pertained to the potential of existing philanthropy to adopt the role of venture philanthropy. Considering generational wealth transfer, about $12 trillion is estimated to be devoted to philanthropy through 2045. There is also $234 billion in donor-advised funds (DAF) and about $1.5 trillion in principal endowments of foundations today. This ample philanthropy can be transformed into a venture approach.
Addressing Implementation Barriers
In Yates’ final argument, he addressed how to overcome the persistent barriers to implementing venture philanthropy. He suggested that venture philanthropy is still in the early-adopter phase and the three gaps that prevent it from accelerating forward are the evidence gap, the enabling environments gap, and the imagination gap.
The evidence gap suggests that there is still a lack of proper frameworks on how evidence should be defined and measured. For example, 60% of the investees of Kiva, an international non-profit organisation for underserved communities, do not have evidence to support their claims. On the other hand, only 1-3% of The Global Impact Investing Network investor surveys report underperformance. This highlights the potential hazard of impact washing. Fortunately, there is a growing field of impact measurement and management aimed at closing this evidence gap.
Even with an inclination towards performing evidentiary work, there are still challenges concerning supportive ecosystems and environments, which Yates referred to as the enabling environments gap. Many social impact funds and NGOs do not have the funding or expertise to demonstrate impact or navigate local regulatory environments. To address this, organisations are partnering to proliferate impact ecosystems, such as the expansive Global Partner Ecosystem of TBN.
Finally, the imagination gap reveals the critical need for a mindset change from charity only to charity combined with advertisement. One way to do this is to tell stories that are not only inspiring but responsible and grounded. Additionally, transformational relationships through on-the-ground human connections and experiences are vital.
In conclusion, Yates delivered a powerful and thought-provoking call to action to inspire current philanthropists, researchers, scholars, and concerned citizens alike. By highlighting the importance of connecting with veterans of the venture philanthropy space, partnering with social enterprises for impact evaluation work, and being responsible about our own giving, he showed us how we can all make a positive difference in the world.
Green Templeton Lectures 2023
The next Green Templeton Lectures in the series will be on Thursday 27 April when CEO, Lego Foundation (2021 to 2022); CEO, Plan International (2015 to 2021); and former UN Assistant Secretary General Anne-Birgitte Albrectsen will speak on co-impact philanthropy and Monday 5 June when President, GiveDirectly; host, The Rest Is Politics; and former UK Secretary of State for International Development Rt Hon Rory Stewart will be the speaker.
