Over the last two decades many great minds from the world of finance have applied themselves to the charity sector; their aim being to introduce some of the rigour of financial and performance analytics and due diligence that the sector was often accused of lacking.
But, there is now a movement to push back on the social return on investment formulae and the ‘productising’ of charitable work and take the sector back to its core purposes of providing insight and innovation.
The charity sector was not designed to deliver programmes at scale and, although in many cases it has done so well, the role of philanthropy is moving away from commissioner and into ‘creator’.
Today’s philanthropist is challenged not to show how many disadvantaged kids they helped for their £100k, but how their £100k transformed systemic disadvantage. The move is from procurement to innovation, from ‘stock-market’ style investment to angel investing. And it’s catching on.
Here’s a five-step guide to becoming a philanthropy angel:
1. Stop buying ‘impact’
The Department for Education spends £59.6bn a year on buying impact. If you add a million to buying the best programmes out there you effectively increase their budget to £59.601bn, when what you want to be doing is changing the way the £59.6bn is spent. This is because, surprisingly enough, the government is terrible at innovating and much better at commissioning.
2. Go big, go early stage
When you are buying impact, it’s quite easy to spread your portfolio broadly – £10k here, £25k there. But, if you want to be a philanthropy angel, you need to be prepared to really back something. If you are putting in less than 50% of the budget for an organisation or programme, you aren’t really taking a risk. Chunky gifts of £100k to £2m that make up the majority of an organisation or programme budget are how you get in the game.
3. Get educated
Going big and going early stage is all well and good if you are an expert in the field you’re looking at but, as any angel knows, it’s a sure fire way to lose cash if you are not. Before you start writing cheques get engaged with the sectors you’re interested in – don’t speak to fundraisers but to experts and don’t go and visit ‘projects’ but go and spend time in the communities that you wish to serve.
4. Take a risk, in fact; take a couple
Angel investors might only expect one in 10 of their bets to come good. We see our philanthropist clients hitting closer to two out of three, but the fact is that there’s going to be real failure, and that’s okay.
5. Avoid the crowd
The ‘crowd’ of foundations and old-style philanthropists tend to be incredibly conservative. They prioritise avoiding waste over ambition, and are wooed by rubber chicken dinners, smooth fundraisers and atypical ‘beneficiaries’ describing their routes from destitution to fame. The food is bad and the content tends to be too. Don’t be afraid to go it alone.
This article was originally published on the Spear’s Philanthropy Blog on 15 April 2015.