Impetus-PEF CEO Daniela Barone Soares on venture philanthropy

Alice Murray: It feels as though social impact investing has really come into the mainstream over the past year, despite the concept having been around for a while now - what's behind this change and where does Impetus-PEF fit in?

Daniela Barone Soares: Much of the change has come from a growing consensus that good intentions alone are not enough. Impetus-PEF's own area of operation - helping young people from disadvantaged backgrounds succeed in education and employment - is a really good example of this. As a nation, we've spent billions of pounds trying to alleviate youth exclusion and, yet, the number of young people who are not in education, employment or training (NEET) has remained stubbornly around the 1 million mark for the last 20 years.

Once you look at it like that, it's hard not to want to change things! We're not seeking to denigrate all the good work that's been done over the decades - we just believe there's got to be a more productive alternative. If a business isn't turning in a profit, the shareholders quickly start asking tough questions but, for charities, how do you measure success? Our take on this is: are your services making a real and lasting difference to the people you set out to help? And can you evidence it? Increasingly, social investors want to see evidence that investee organisations are really producing results. And, in order to attract investment in this new world order, charities will have to rethink their approach.

AM: Could you explain how venture philanthropy works? 

DBS: Venture philanthropy is a more hands-on and active take on traditional philanthropy and involves providing strategic operational input as well as money to a charity. It uses the principles of venture capital, with the investee organisation receiving management support and specialist expertise, on top of grant-funding. The focus however is on achieving a social, rather than a financial, return.
Impetus-PEF was founded by leaders from the PE and VC worlds, many of whom also sat as trustees of charity boards. They brought with them all the best practices from the world of business: due diligence, rigorous assessment and development of management teams, and financial discipline.

AM: How do you select the charities you work with?

DBS: We only invest in charities that meet a set of criteria and that we think are already making a difference. By working with portfolio charities in-depth and over a number of years, Impetus-PEF gets to help these organisations focus everything they do on producing life-changing outcomes for their beneficiaries. Our team includes investment directors who work with charity leaders on everything from mission and strategy to business plans and talent sourcing, helping them design and implement robust systems and processes. This involves asking difficult questions and, sometimes, it involves making hard choices - the aim is always to provide excellent and effective services to the people most in need.

AM: Should all private equity and venture capital houses look to have some level of focus on social impact?

DBS: Well, of course we think they should! But ultimately it's a decision for firms to make for themselves. There's definitely been a change though in the way people conduct their business: 15 years ago, only a minority of businesses - and generally then only the really high-profile ones - had dedicated CSR functions. Now virtually everyone, even the smallest local enterprise, has some sort of charitable giving policy. It's the norm - you're the odd one out if you're not giving something back. That's a considerable shift in thinking in a relatively short space of time.

AM: What has been your greatest achievement so far at Impetus-PEF?

DBS: More than anything, it's been an accomplishment to achieve an unrelenting focus on ensuring everything Impetus-PEF works towards results in a meaningful change in the lives of the children and young people who most need it.

In the time that I've led Impetus-PEF, I've had the chance to travel around the country and meet so many young people being supported by the charities in our portfolio. Each had a different story about their past but all had a common theme: they didn't get a fair start in life and those circumstances stood as seemingly insurmountable obstacles.

Impetus-PEF is determined to make a difference in young lives by finding the solutions that really work on the ground and ensuring they become more effective. We are driven by our focus on supporting young people succeed in education and make the all-too-important transition into employment.

This has been our thinking internally for over a year, which has now shifted to our advocacy work. Most recently this approach has created ripples at the international level. In 2014 I chaired a working group that formed part of the UK National Advisory Board, which reported to the Social Impact Investment Taskforce established under the UK's presidency of the G8. The thrust of the working group's argument was that social organisations needed to be ‘impact-ready' as much as they needed to be ‘investment-ready'. By this I mean an organisation requires two distinct types of support - one is around building resilient organisational infrastructure prepared to scale up and the other is putting in place the specific data and performance management systems that enable the entire organisation to predictably and reliably produce the results that truly change lives. These conclusions have already unlocked government funds in the UK, which will be tied to milestones related to building an organisation's impact-readiness.

AM: If you could have one wish for the social sector, what would it be?

DBS: I want to change the way the social sector works and the way that commissioners, government and funders invest. I want to drive impact, influence funding choices and encourage government to commission on outcomes, not costs: it so much more cost-effective in the long run - not just for the public purse but for the wellbeing of our young people.

We're an organisation with a huge ambition: the private equity industry - always our greatest supporters - are fundamental in helping us deliver on this ambition.

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