The Private Equity Investing Model: Helping Leaders Build Great Nonprofit Institutions

Editor’s Note: This month’s Chairman’s Corner is an excerpt of remarks Mario Morino made at a Slate 60 panel he was part of on November 13, 2006, at the William J. Clinton Presidential Library, in Little Rock, AR.

In the early 1990s, I retired from business and became deeply involved in philanthropy. Initially, we considered various forms of social investing and “capacity building,” which were then popular emerging trends. But after some initial experimentation and practical application, it dawned on me that what was really needed in the nonprofit and philanthropic sectors was an approach that I had lived for years in the private sector—that of growing my business in partnership with General Atlantic, LLC, a premier global private-equity investment firm.

Practices of Successful Families

How can you best invest in your family’s success? How do you encourage your children to lead their own lives while staying connected to your family? These and other stimulating questions were the subject of a November 29 gathering of VPP investors and friends featuring Charles W. Collier, senior philanthropic advisor at Harvard University and the author of Wealth in Families. Collier, a renowned expert on the subject of family philanthropy, shared lessons learned from his work helping hundreds of successful families... More »

The Private Equity Investing Model: Helping Leaders Build Great Nonprofit Institutions

Editor’s Note: This month’s Chairman’s Corner is an excerpt of remarks Mario Morino made at a Slate 60 panel he was part of on November 13, 2006, at the William J. Clinton Presidential Library, in Little Rock, AR.

In the early 1990s, I retired from business and became deeply involved in philanthropy. Initially, we considered various forms of social investing and “capacity building,” which were then popular emerging trends. But after some initial experimentation and practical application, it dawned on me that what was really needed in the nonprofit and philanthropic sectors was an approach that I had lived for years in the private sector—that of growing my business in partnership with General Atlantic, LLC, a premier global private-equity investment firm.

I also concluded that the financing system for a class of nonprofits seeking to scale their impact was dysfunctional. And I asked myself how could we adapt the approach that General Atlantic used to help build successful companies to helping nonprofits in the area of social services build high-performing organizations to scale their impact for children and families.

When General Atlantic invested in my firm, they not only provided growth capital, but more importantly they provided “strategic assistance.” Taking a long-term view, the firm wanted to help the CEOs in which they invested build great businesses, rather than replace them. They invested in leadership and great people as opposed to just products and markets, and preferred to influence you rather than control you. They pushed to recruit the best talent, and helped bring them onboard and keep them. They gave me advice and opened doors that allowed me to think differently, bigger and bolder. They often pushed me past my comfort zone, without breaking me or my firm. And, they helped me grow as an executive.

Today, in our work with Venture Philanthropy Partners, we seek to mirror that approach. VPP is a six-year-old philanthropic investment organization that has committed $29M in growth capital to 12 nonprofit organizations in the National Capital Region. These organizations are growing stronger and more effective, serving tens of thousands of children better, and raising their expectations of themselves and of what is possible. In addition, they are leveraging—by a factor of two—our investment for new capital for themselves and the region.

We bring a rigor, discipline, and execution capacity to the investment process. Of course, all good investments start with the organization and people. But the real work begins after we commit the capital, working closely as a trusted advisor with each of our partners, providing advice, access to networks of people, expertise, and capital.

We have learned some important lessons about blending the private equity investment approach with the earned understanding of how nonprofits, public funders, and foundations function and exist in their communities. These include:

• “Place” is important. Just as “all politics is local,” we found that the most effective nonprofit investing is local so we focus our investments in the National Capital Region.

• Investment organizations like ours need seasoned full-time executives with operational experience, who have been there, done that, understand the playing field—politically and socially—and who grasp the important cultural nuances in this space, whether around race, class, turf, or ethnicity.

• Leadership is even more important than we envisioned.

• There was much to learn from those who went before us. The lessons and knowledge from these individuals and organizations make it possible for us to learn and adapt our model for effective philanthropic investing.

• The ecosystem and resources for nonprofit leaders seeking to scale their organizations are at best frail, in many cases nonexistent, or, worse yet, populated by too many providers who are almost certain to be ineffective. As a result, expectations for what is possible are low.

• And, finally, our work has to advance innovative public policy and leverage public funding, not replace it.

The lessons we have learned over the past six years have given us insights that have the potential to influence how the allocation and use of philanthropic and public funding could be improved for greater social impact and return.

- Mario Morino

The Practices of Successful Families

How can you best invest in your family’s success? How do you encourage your children to lead their
own lives while staying connected to your family? These and other stimulating questions were the subject of a November 29 gathering of VPP investors and friends featuring Charles W. Collier, senior philanthropic advisor at Harvard University and the author of Wealth in Families. Collier, a renowned expert on the subject of family philanthropy, shared lessons learned from his work helping hundreds of successful families shape their philanthropic goals. He also shared his expansive perspective as wealth as more than just financial capital, and encouraged the attendees to also focus on building their family’s human, intellectual, and social capital, as well.

VPP Founding Investors Katherine and David Bradley and Gabriela and Doug Smith co-hosted the event, the second VPP investor event this year on the topic of family philanthropy. Based on the turnout, interest, and engagement of those present, VPP plans to continue the discussion with a third event on this topic in 2007.

VPP Represented at Slate 60 Conference

A number of VPP investors and board members joined Bill Clinton, Ted Turner, and Bill Gates, Sr. on November 12 and 13 for the Slate 60 Conference on Innovative Philanthropy in Little Rock, Arkansas. Kathy Bushkin Calvin, Steve Case, Joe Robert, Ralph Smith, and Mario Morino spoke, and were joined by Jack Davies and Jim Kimsey. Slate's companion section on philanthropy includes a piece on venture philanthropy and its impact, "Grant Away," which mentions VPP. Audio and video of the sessions are available for download and Carla Dearing, President and CEO of Community Foundations of America, provides a recap of the conference.

Investors Host Dinner for Women Philanthropists

On November 6, VPP helped convene a small private dinner, hosted by VPP Founding Investors Kathy Bushkin Calvinand Caren DeWitt Merrick, on the subject of women in philanthropy. The evening began with the attendees providing a snapshot of their individual philanthropic efforts, and then VPP Managing Partner Carol Thompson Cole spoke about VPP, sharing some of the lessons that VPP has learned in its work here in the region. While the select group of attendees represented a wide range of philanthropic interests and engagement levels, all brought to their philanthropic endeavors significant intellectual capital and skills from their successful business or legal careers, and seemed eager to use these talents in their philanthropic work. And, while the focus of their philanthropic efforts ranged from international microfinance to organizations serving families in the National Capital Region, including VPP’s investment partners, they all agreed that there are not enough opportunities for women to come together to discuss and engage in philanthropy in a meaningful way. VPP is exploring convening a larger gathering of women sometime in 2007 to continue this conversation.

Leonsis Film Accepted into the Sundance Film Festival

Congratulations to first-time film producer Ted Leonsis, Vice Chairman of America Online, Inc. and a VPP Founding Investor, whose film, Nanking, was accepted into the 2007 Sundance Film Festival, one of only 122 films accepted out of 3,287 reviewed.

According to the film’s website, Nanking is a documentary “that tells the story of the rape of Nanking, one of the most tragic events in history. In the winter of 1937, the invading Japanese army murdered over 200,000 and raped tens of thousands of Chinese. In the midst of the horror, a small group of European and American expatriates banded together to save 250,000 -- an act of extraordinary heroism.”

Leonsis has written about the film on his entertaining blog, Ted’s Take, describing it as a labor of love. According to his blog, Leonsis is creating a “Shoah-like” foundation that will receive any profits that the film makes, and he is digitizing and archiving all research and materials for the movie at Georgetown University, his alma mater. Says Leonsis on his blog, “I am hopeful that this film also shows that all wars create their own levels of hell and that common men and women can rise up and band together to conduct incredible feats of kindness and heroics.”
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Jensen Named Outstanding Philanthropist

New VPP investor Julie Jensen was named Outstanding Philanthropist by the Association of Fundraising Professionals at the organization’s Fifth Annual National Capital Philanthropy Day Luncheon and Awards on November 4. Jensen was nominated by the Washington Area Women’s Foundation for her generous investments of financial support and intellectual capital to launch, build, and sustain organizations working to better the lives of thousands of the National Capital Region’s families. In particular, she was instrumental in the creation of the group’s Stepping Stones initiative, which helps build the long-term financial independence and economic security of low-income women-headed families in the region. She is also a long-time board member of VPP investment partner Latin American Youth Center. Said Jensen, “It has been an honor and privilege to have worked in the Washington, DC, region for the last 15 years. I am really looking forward to being a part of VPP.”

Expansion

College Summit Launches Successful Peer Leadership Training Program
Thanks to Tom Harrison, Senior Marketing & PR Coordinator, for this update.

This fall, College Summit took on a daunting task—making talk about college cool at school.

At two College Summit Peer Leadership Training Sessions held at Maya Angelou High School in Washington, DC, and Crossland High School in Prince George’s County, MD, 15 educators and more than 100 seniors from nine schools attended a program to institutionalize the students’ role as “change agents” among their peers. These students already completed an intensive four-day College Summit workshop over the summer, where they received a head start on their college applications and an introduction to their new role as Peer Leaders.

The one-day program began with a pledge between students and educators to work together and support each other through the college application process this school year. After College Summit staffers dispelled the mystery surrounding effective leadership, they helped students identify their personal leadership style. Next, students were shown how to apply those leadership styles to their classrooms, schools, and communities.

“I was impressed by how passionate the students were about transferring the base of the knowledge received from the [summer] workshop to the rest of their peers,” said Derek Canty, College Summit’s Co-Founder, VP of Talent, and one of the program’s facilitators. “They take it very seriously.”

Michael Gemm, the organization’s New Sites Program Manager, gave educators in attendance several ways they could utilize their Peer Leaders to create college-going culture at their schools. He offered a compelling reason for school districts to invest in transforming their students into Peer Leaders. “These resources already exist. There’s virtually no added cost to the school, only additional time.”

During afternoon breakout sessions facilitated by College Summit High School Coordinator Heather Sheridan, students teamed up with teachers to develop activities that could inspire students to apply to college. One team crafted a “College Week” of activities aimed at freshmen and sophomore classes. Other teams laid the groundwork for forming extracurricular College Summit clubs to plan college awareness events. Other ideas included a “FAFSA Help Night” and a Peer Leader-led personal statement writing group.

Sheldon Maye, Senior Program Coordinator and facilitator at the Crossland High School event, commented, “As impressed as I was with the Peer Leaders, I was just as . . . impressed by the support of the school staff. I had numerous conversations with staff members about how special their children are and how a program like this was just what they needed.”

Outcomes

DC Mayor Williams and Police Chief Ramsey Visit LAYC
Thanks to Jim Whitney, Director of Communications, for this update.

Mayor Anthony Williams announced on November 15 at the Latin American Youth Center that a new report has found that the comprehensive approach to reducing Latino gang violence in the District of Columbia's Columbia Heights/Shaw neighborhoods, initiated in August 2003 in response to a series of gang-related homicides between 1999-2003, has dramatically reduced Latino gang-related violence in DC and led to a drop in the number of young people who are becoming gang members. There has not been a Latino gang-related homicide in the District of Columbia since October 9, 2003.

Commissioned by the Mayor's Office on Latino Affairs (OLA), the report used quantitative and qualitative research, including analysis of crime rate data, focus groups, and interviews with more than 40 young people and adults, to independently evaluate the effectiveness of the Gang Intervention Partnership (GIP) in its first three years of operation.

GIP has focused not just on reducing violent behavior, but on addressing the myriad social and economic issues, such as family situation, employment status, school attendance, peer relationships, and limited recreational opportunities, which can create environments that lead to violence among young people. GIP’s holistic approach marries prevention and intervention initiatives with intelligence gathering and enforcement efforts, providing a new model for reducing gang violence.

“The report’s fundamental conclusion is clear: the Gang Intervention Partnership is working,” said Mayor Williams. “It’s doing exactly what it was created to do—reduce Latino gang violence. As a result of GIP, we know more about Latino gangs in DC, our community partners are providing more recreational and educational alternatives to gangs, and as a community, we have gotten better at preventing gang violence from occurring. We plan to replicate this multi-agency approach in other parts of the city, and for other jurisdictions working to reduce gang-related violence, the Gang Intervention Partnership offers a roadmap for putting together a highly effective response.”

Mayor Williams was joined at the press conference by Police Chief Charles Ramsey, Councilmember Jim Graham, Office on Latino Affairs (OLA) Executive Director Gustavo Velasquez, and LAYC Executive Director Lori Kaplan.

The Latin American Youth Center has been a key community partner in the GIP, conducting outreach to gang-related youth and working closely with gang-involved young people to offer them arts, recreational and leadership programs as well as other opportunities to build skills and self-confidence.

New Data Highlights Heads Up’s Impact
Thanks to Sara Brandspigel, Development Manager, for this update.

To evaluate impact, Heads Up conducted a comprehensive analysis of standardized test scores. The results show that Heads Up has been successful at improving students’ reading skills and contributing to school success.

“While we know intuitively that good things are happening, it is great that we can prove it with real outcomes data,” said Brian Weed, President of the Board of Directors.

Heads Up students reached reading proficiency at twice the rate of other students in the same schools, according to 2003-2005 data from No Child Left Behind. The data also demonstrates that Heads Up contributes to school success—schools with the Heads Up program increased reading proficiency at double the rate of other elementary schools in DC, despite the fact that they started at a significantly lower point.

On another standardized test, Heads Up students improved reading scores at a rate faster than other students in the 2005-2006 school year. The Dynamic Indicators of Basic Early Literacy Skills (DIBELS) test assesses student proficiency in important reading skills. At the beginning of the school year, only 15 percent of Heads Up students scored at grade level on a key indicator of reading proficiency. By the end of the school year, 77 percent had achieved grade level.

Heads Up will also examine students’ DC Comprehensive Assessment System scores and report card grades as they become available from DCPS. This information will provide a complete picture of student progress as Heads Up continues to improve its curriculum.

Awards and Recognition

Mary’s Center Awarded $500,000 by AECF’s Families Count Program
Thanks to Vanessa DeCarbo, Director of Advocacy and Communications, for this update.

Mary’s Center for Maternal and Child Care is one of four innovative organizations that strengthen families and communities to be honored this year by the Annie E. Casey Foundation as part of its Families Count: The National Honors Program. Mary’s Center becomes one of 50 nonprofit models nationwide recognized for their highly effective strategies and services since the Families Count program began in 2000.

Mary’s Center joins ECD/HOPE (Enterprise Corporation of the Delta/Hope Community Credit Union) in Jackson, MS; Family Service Association of San Antonio, Inc. in San Antonio, TX; and Southern Good Faith Fund in Pine Bluff, AR, as 2007 honorees. The honorees can use the unrestricted awards in whatever way will best support their goals.

“These organizations deserve our recognition and accolades for putting families on solid ground and giving them the tools to build bright futures,” said Douglas W. Nelson, president of the Casey Foundation. “No matter where the honorees reach families—from immigrants coming to our nation’s capital to parents needing a leg up in the Delta region—they have the ingredients to help them succeed: financial and parenting education, health care solutions, and economic, social, and career-building opportunities.”

“Everything we do is geared toward helping immigrant and under-served families feel they can be successful through civic engagement and economic stability,” said María S. Gómez, President and CEO. “This award reflects families’ dedication, strength and hard work, as much as it reflects the success of Mary’s Center’s strategies.”

Mary’s Center has specialized in meeting the needs of immigrant and under-served families for the last 18 years. As a federally qualified health center, the organization reaches beyond clinical needs to provide parents and children with an array of supports and services, beginning with preventive health care and extending to home visitation services, case management, family literacy and education, adolescent supports and a home-based child care licensing program that enables mothers to start their own businesses.

“We involve parents in developing every program,” Gómez observed. “Parents really want to build a support system among themselves.”

“Through innovative strategies, the FAMILIES COUNT honorees give families the supports and resources they need to succeed,” said Nelson. “They act on the principle that children do well when their families do well, and their families do better in supportive communities.”

The Casey Foundation recognizes FAMILIES COUNT honorees during National Family Week, November 19 to 25, 2006, to emphasize the important role organizations play in strengthening families and communities.

“These organizations inspire us with their determination to ensure all families can succeed in the economy, in their communities and with their children,” said Ralph Smith, Senior Vice President of the Casey Foundation, and a VPP board member. “Our continuing challenge as a nation is less about know-how than it is about will—the willingness to care enough and do enough so that all families can realize their dreams for their children.”

Mary’s Center joins VPP Investment Partners AALEAD (2004), CentroNía (2004), Child & Family Network Centers (2003) and the Latin American Youth Center (2002) as FAMILIES COUNT honorees.

Will Gunn Honored as Distinguished Alumni at Harvard
Thanks to Tanzi West, Director of Communications, for this
update.

On Saturday, October 28, Boys & Girls Clubs of Greater Washington President & CEO Col. Will Gunn received a Distinguished Alumni Award from the Harvard Legal Aid Bureau (HLAB) for his dedication and commitment to public service.

During his 25 years in the United States Air Force, Colonel Gunn (ret.) served in various legal counsel positions including Chief Defense Counsel; Department of Defense; Office of Military Commissions, where he led defense efforts for all detainees brought before military commissions in Guantanamo Bay, Cuba; and Executive Officer to the Air Force Judge Advocate General (JAG) where he coordinated the training and assignments of over 2,500 military paralegals and lawyers.

Gunn has devoted his personal time and energy to coach youth basketball teams; adopt elementary school classrooms; tutor students; and mentor cadets at the Air Force Academy, young lawyers, military members, and young people around the country. Said Gunn, “It was a great honor to be recognized by the Harvard Legal Aid Bureau. As a student at Harvard, I was privileged to serve as president of that organization. It served as the foundation of my law school experience, and now to be recognized as a distinguished alumni is incredibly special to me.”

Programs & Services

CFNC's Mason Speaks at CreditSmart Symposium
Thanks to Kate Lyng, Manager of Development, for this update.

Over the past few years, more and more of CFNC’s population has consisted of recent immigrants with the need to learn English and lacking a basic understanding of money management. Typically, CFNC families do not have bank accounts and may fall prey to payday loans from predatory lenders who have situated themselves within the community. For families to be strong they must be financially secure so CFNC adopted Freddie Mac’s comprehensive credit education program, CreditSmart, designed to help increase consumers’ financial literacy by providing them with life-long money management skills.

In FY2005/06, 32 parents attended at least one two-hour session which included lessons designed to help consumers learn how to build and maintain good credit, and prepare for homeownership. CreditSmart information, offered in both Spanish and English, is taught in a manner that is easily understood. After the training, parents assimilated lessons into their daily lives and began to save money by opening checking accounts, setting budgets, and keeping track of their expenses.

In November 2006, Executive Director Barbara Fox Mason spoke about CFNC’s efforts to improve families’ financial stability at a Freddie Mac Symposium, “Financial Education for Maximum Results.” She explained how the CreditSmart program has empowered families to achieve long-term goals by applying the lessons they have learned. Mason presented to a group that included policy makers, congressional staff, realtors, staff from nonprofit organizations, the financial services industry and others interested in financial literacy. Other speakers included Jean Chatzky, editor-at large for Money Magazine, official Money Coach for AOL and financial editor for NBC’s Today Show; and Marc Morial, President/CEO of the National Urban League.

Noteworthy Announcements

CMHS Wins Multi-Year County Contract
Thanks to Sarah Beglarbegui, Special Projects Manager, for this update.

CMHS recently won a four-year $600,000 (per year) contract with Fairfax County to provide gang intervention/prevention services in multiple Northern Virginia jurisdictions, including Fairfax County/City of Fairfax, Loudoun County, Prince William County/City of Manassas, Alexandria City, and Arlington County/City of Falls Church.

“This award will bolster CMHS’s ability to provide a wide range of services to Latino, Asian, and African American youth, ages 12 to 21, who are gang-involved or identified as being at risk for gang involvement, and their families. More importantly, it will enable CMHS to play an active role in the development of a comprehensive inter-jurisdictional intervention/prevention strategy,” said Executive Director Dennis Hunt.

Wrap-around services to be provided under the contract include customized individual strength-based, solution-focused cognitive behavioral therapy and/or family therapy, case management, life skills coaching, mentoring, parent education, and outreach to engage parents and community service providers in prevention strategies designed to curb the appeal of gang membership, and halt gang growth.

AALEAD Showcases Warren Brown
Thanks to Rosetta Lai, Vice President for Development and External Affairs, for this update.

Asian American LEAD hosted a Cake Auction featuring lawyer-turned-celebrity baker Warren Brown on November 4, at the home of George and Synthia Dang in Silver Spring, MD. Brown, the star of the Food Network’s Sugar Rush and owner of CakeLove and Love Café, entertained the audience by making chocolate cupcakes and sharing his story about finding his passion in cakes. The demonstration was followed by an auction of ten CakeLove cakes which went for up to $300 per cake. The event also featured AALEAD youth and VISTA volunteers who provided testimonials to the importance of AALEAD in serving low-income Asian American immigrant families.

IRA Tax-Free Distributions Available for Charitable Purposes

The Pension Protection Act of 2006 (P.L. 109-280), signed into Law on August 17, 2006, contains an important incentive for charitable donations made directly from either a traditional IRA or Roth IRA. The provision is only available until December 31, 2007 (tax years 2006 and 2007) and allows taxpayers who are 70 ½ years or older to contribute funds from their IRA or Roth IRA directly to charitable organizations, and exclude donations up to $100,000 per year from the taxpayer’s adjusted gross income.

This can be a powerful incentive for charitable contributions for those taxpayers who are required by law to take distributions from their IRAs—money that is often subject to income taxes. The links below from the Independent Sector, a non-partisan coalition group serving charities, foundations and corporate giving programs, contain useful information on how the IRA rollover works, who benefits, and what a taxpayer needs to know to take advantage of the IRA rollover.

• Overview
• Fact Sheet for Charities
• Fact Sheet for Donors

Two Tools for Donors: Spirit of Giving Guide and Catalogue for Philanthropy

The Community Foundation for the National Capital Region’s annual Spirit of Giving is now available. The 15 organizations featured in A Guide to Investing in our Region’s Middle-Schoolers believe in the potential and promise of middle school youth. VPP Investment Partner Asian American LEAD is one of the featured organizations. Download the 33-page PDF.

The 2006 Catalogue for Philanthropy, published by the Harman Family Foundation, is also available. The Catalogue profiles 71 new nonprofits under the environmental, cultural, educational, human services, and international organizations categories. Share Our Strength Founder and VPP board member Billy Shore provides a guest essay, "Bearing Witness," and the Latin American Montessori Bilingual Public Charter School is a featured nonprofit.

Second Purpose Prize Nomination Process Opens

Every day nearly 8,000 baby boomers turn 60. This past September, Civic Ventures announced the first winners of The Purpose Prize—five $100,000 and ten $10,000 investments in Americans over 60 whose creativity, talent, and experience are transforming the way the nation addresses critical social problems. Dozens of other innovators received national recognition for their work. Now nominations are being accepted for the 2007 Purpose Prize. To nominate someone or apply yourself, visit http://www.leadwithexperience.org. The application deadline is February 1, 2007. The awards will be announced in the summer of 2007.

Bridgespan Launches New Mini-Site for COOs

Bridgespan has launched the first of a series of new mini-sites dedicated to key nonprofit roles—this one for COOs. This new area of Bridgestar.org contains ideas and tools for prospective and current COOs and hiring managers—including information on how to scope the role, interview and hire for it, be considered for it—and connect to other nonprofit COOs. The information is free but requires registration (also free). One of the featured resources in the COO Roles/Structures: Stories From the Field, is VPP Chairman Mario Morino's May 2006 Chairman's Corner, entitled "The COO—Enigma to Many."

Warm Holiday Wishes from All of Us at VPP!