The Venn Foundation uses Program-Related Investments in surprising new ways.
This week, we’re kicking off a two-part mini-series how to fund a business that does social good. We did something like this in April 2016. Next week, Cathy Clark is going to be here to talk about CASE Smart Impact Capital, an online resource to help social entrepreneurs figure out how to find the right capital at the right time.
This week, we’re talking to Jeff Ochs of the Venn Foundation. Jeff is an experienced entrepreneur and investor. He invented and commercialized an educational party game that was licensed by Hasbro. He started a successful nonprofit, Breakthrough Twin Cities. And he was the Executive Director of an angel investing network. In each of these instances, Jeff saw the difficulty of getting the right investments to the right startups at the right time.
Jeff explains that today there are two types of capital:
- Charitable donations, which support causes we care about with no expectation whatsoever for financial return.
- For-profit investments, which are designed to make as much money as possible for investors on a risk-adjusted basis.
“In this current capital system, it is obvious why there is no investment capital available that is willing to accept ‘below-market’ financial terms,” Jeff explains. To meet this challenge, Jeff partnered with Rob Scarlett and Jeanne Voight to launch the Venn Foundation.
Jeff says, “At the highest level, Venn Foundation has a method for using charitable donations, which today we just give away, to make investments. This allows us to create the below-market investment capital that we badly need. Charitable investments have all the same tax advantages of donations, are anchored against -100% financial returns of donations, and allow the precious charitable donation to be recycled over and over again. Venn Foundation is where charity and investing meet.”
Venn is creating a marketplace for charitable investing. They are removing the obstacles that donors face in making charitable investments directly. By opening a special donor-advised fund called a Venn Account, any individual or organization can recommend that their charitable dollars be used by Venn to make Program-Related Investments, or PRIs. Venn can syndicate any PRI among any number of Venn Accounts. Financial returns from these PRIs go back to participating funds for the donors to redeploy into new PRIs or to grant out as desired.
Venn recently made a program-related investment to Binary Bridge. BinaryBridge creates software that helps humanitarians do their work effectively and efficiently. You may recall our conversation with BinaryBridge founder Lori Most.
Who should seek program-related investing? Jeff suggests that business and nonprofit leaders ask themselves, “Is that I’m doing helping advance a charitable cause as defined by the IRS? And if the answer is yes, or maybe yes, the program-related investment tool is something that could apply to you and your goals.”
Social Entrepreneurship Quotes from Jeff Ochs
“If that kind of capital existed, what could we do?” Jeff Ochs, Venn Foundation
“It’s where charity and investing meet.” Jeff Ochs, Venn Foundation
“Today, there is not a market for charitable investing.” Jeff Ochs, Venn Foundation
“If capital behaved differently, what would be possible?” Jeff Ochs, Venn Foundation
“Capital is the lifeblood of our economy.” Jeff Ochs, Venn Foundation
“If we can change the nature of capital, we can change the way our economy works.” Jeff Ochs, Venn Foundation
Social Entrepreneurship Resources:
- Venn Foundation: https://www.vennfoundation.org
- Book: Crazy Good Advice: 10 Lessons Learned from 150 Leading Social Entrepreneurs: https://tonyloyd.com/book