Ronald Arculli and Francis Ngai (30s Group) EJ Insight Expert Columns 6 February, 2012
In today’s society, charitable donations have taken on a new approach whether at a corporate or personal level. Donors quite often prefer not to just write a cheque and then forget about the cause they have chosen to support. Corporates now frequently want to be active with the cause of their choice and some even choose to participate actively in the nitty-gritty of the services provided.
Another trend that has gained increasing popularity is venture philanthropy which has its origin in the much-maligned venture capital approach. However, the latter seeks to maximize financial returns while venture philanthropy aims to be a sustainable model for addressing social problems and thus social returns. Venture philanthropists are active investors and not passive in the traditional sense. They often attract like-minded philanthropists to invest in a fund (“the Fund”) which they manage and invest.
But what is or why venture philanthropy? It is a combination of these five key elements: first, the venture philanthropists invest the Fund and are involved in a long-term and close relationship with the social enterprise; second, it focuses on the social impact brought by the financial investment; third, it emphasizes on the capability of running the business; fourth, it provides management know-how and business network; and lastly, it encourages the use of an innovative approach to address social problems. In this way social enterprises not only have a better chance of survival but also of turning the venture into a sustainable success. Thus, financial returns take second place to social returns.
The first non-government investment fund in Hong Kong that promotes the development of social enterprises is Social Venture Hong Kong (SVhk: http://sv-hk.org/). SVhk has a network of over 100 young professionals across all industries, including accountants, corporate consultants, lawyers, etc. These volunteers offer innovative ideas and management expertise, and work closely with social enterprises to foster social change. SVhk also performs in-depth research on social issues in Hong Kong such as poverty, ageing and environment to explore potential investment opportunities.
One recent example is the Diamond Cab project which is a success story of the venture philanthropic model that applies business approach to meet social needs. This social enterprise runs a taxi service catering for the needs of wheelchair users. It originated from a SVhk research project that learnt that the commuting needs of disabled persons are pressing. Members of SVhk brainstormed the idea of introducing a specially designed cab that allows its customers to board and travel whilst in their wheelchairs in a safe and convenient manner.
Then, SVhk professionals stepped in and planned the business model while others utilized their network to line up the taxi industry holding taxi licences and the non-government organizations which have access to potential customers of the cab service. The Diamond Cab can be pre-booked to take customers from their location to their destination or ply for customers as a normal cab. Involvement by SVhk significantly reduced the time required to launch the project and turned the innovative idea into a sustainable business.
Financial investment and entrepreneurial skills are just tools. The choice is for those who possess capital and/or business skills to decide whether they should ultilize this set of tools for merely financial return or for social return as well. We believe that using financial investment and business tools to nurture social enterprises can set a new trend of investment that balances the pursuit of financial and social returns. If so, profit generated will allow social enterprises to stand on their own instead of relying on donations. Venture philanthropy helps people to help themselves. In such a way, the social impact created will be profound and lasting.
Being a global financial centre, Hong Kong has an advantage in attracting financial and human capital. Venture philanthropy brings together SVhk or the like non-governmental organizations and business community, and can set the best example of how they can cooperate to address social problems in a sustainable business model.
The real question for you is why should all your donations be passive? Invest in venture philanthropy!
Ronald Arculli is Chairman of the Honorary Advisory Committee of SVHK Foundation and Francis Ngai is Founder and Chief Executive Officer of Social Ventures Hong Kong.