My thanks to Bill Shore, Community Wealth Ventures chairman and VPP board member, for co-writing this column with me which is derived, in part, from our work on the report High-Engagement Philanthropy: A Bridge to a More Effective Social Sector.

Wide-ranging Congressional hearings and the likelihood of far-reaching legislation on nonprofit practices, abuse, and oversight, are grabbing headlines and the attention of foundations and charitable organizations everywhere. To be sure, more transparency, stronger boards, and greater accountability will be good for nonprofits. However, the question that isn’t being addressed is the issue of effectiveness in how funds are deployed to nonprofits. It’s an issue foundations and nonprofits should be exploring together.

Last month, VPP and Community Wealth Ventures jointly published a report, High-Engagement Philanthropy: A Bridge to a More Effective Social Sector. The dialogues between nonprofit leaders and high-engagement philanthropists suggest that the most pressing need in the nonprofit sector is financial sustainability, especially of the nonprofit organizations that have increasingly assumed responsibility for everything from charter schools to maternal and child health. The lack of sufficient funding to build strong and healthy organizations is what keeps the sector from leveraging its assets and knowledge to maintain its most successful organizations and help those that seek to grow and scale.

Most of the organizational challenges that the investors (funders) and investment partners (grantees) discuss in the report include lack of management depth, ability to recruit and retain leaders, inadequate investment in infrastructure, etc. All of these problems stem from lack of growth capital or are exacerbated by it. Greater effectiveness and access to capital are inextricably linked and the challenge facing nonprofits, funders, and policymakers alike is finding ways to increase access to capital—money to fund and grow nonprofits—and the means to distribute it effectively.

In the economic marketplace, access to capital is a naturally occurring phenomenon. This is not to say that all businesses have access to all the capital they want or need but rather there are structures and institutions in place for business that can demonstrate a return on investment to compete for capitalization. When a business succeeds, the capital markets respond.

In the nonprofit environment, this is simply not the case. When a nonprofit is successful, it sees a market response but it comes in the form of an increased demand for its services, often to a saturation point. The organization may see an increase in private donations but rarely equal to the scale of what it seeks to accomplish. This inability to access capital turns scaling an effective and high-performing nonprofit enterprise into a Herculean task, akin to lighting a thousand fires in communities around the country without the benefit of matches but rather by relocating one log at a time from the original campfire. This is such an inefficient and exhausting process that it is likely to wear down and wear out all those who engage in it, leaving them spent long before they achieve their goals.

High-engagement philanthropy, sometimes called venture philanthropy, arrived on the public’s radar screen a number of years ago offering a different approach to funding nonprofit organizations. Adapting aspects of venture capital investing, high-engagement philanthropists focus on making substantial investments of both growth capital and strategic assistance in a select few high-performing nonprofits to help them build and scale their organizations. While much has been written about this field, it is premature to judge its effectiveness.

High-engagement philanthropy often plays one of the roles that capitalization structures would play if they existed for nonprofits: pooling substantial amounts of capital to be invested in a select number organizations whose leadership and performance promise high social rates of return. Although relatively small and formative at this stage, they create access to capital at a level that doesn’t readily exist elsewhere for nonprofits. Like commercial investors, high-engagement philanthropists recognize that an investment that combines capital with strategic assistance and that leverages their own resources and networks is a stronger investment than capital alone.

In this way, high-engagement philanthropy may be seen as yet another step on the philanthropic continuum, not an answer in and of itself and certainly not a panacea but an indispensable stage in the evolution of a philanthropic and public policy partnership that truly meets our needs.

The volume of discussion about capital and financial services for community-based nonprofits must be turned up. There are no hard and proven answers, but clearly more needs to be done to engage the venture capital and the broader financial services industries. Such expertise combined with comparable expertise of the foundation and nonprofit worlds could rapidly advance the inherent financial understanding of the sector that would lead to new options and, hopefully, to the development of a "social financial services industry."

-Mario Morino

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Snapshot of Investment Partner Summer Activities

Almost 7,000 children and youth across the National Capital Region are participating in summer programs run by seven VPP investment partners. Below is a snapshot of some of their planned activities for summer 2004.

ASIAN AMERICAN LEAD
AALEAD’s elementary-level summer program provides academic and recreational enrichment programming to 60 students in July and early August. Students in grades one through six participate in a concentrated program of academics (math, reading, and ESL), athletics (swimming, dance, sports, kite days), and recreation (museum visits, aquarium, park days, and playtime).

Fifteen students, ages 14 to 19, are participating in the High School Academic and Leadership Program. Education and Arts Coordinator Sonal Sheth says, “We have a great group of young people this year who are eager to use the adult resources offered at AALEAD to try new activities and develop their skills.”

The five-week program includes videography and music technology classes; college preparation and career exploration activities, including college visits and a career shadowing day; sports, nutrition, dance, and teambuilding activities; and mural instruction. The mural project was developed in partnership with the Washington Parks and People, the Student Conservation Association, and the Latin American Youth Center, another VPP investment partner.

Both programs culminate in a joint Talent Show on Thursday, August 5 at 6:00 pm. One of the acts will be an educational video with original music on substance abuse prevention, created by the high school participants. Students, staff, and other community members will showcase their talents during the evening.

BOYS & GIRLS CLUBS OF GREATER WASHINGTON (BGCGW)
The 25 locations of BGCGW serve about 5,000 students combined, primarily ages 6 to 14, Monday through Friday from the end of June until mid- to late August. According to BGCGW Executive Vice President Tim Sheahan, one of the goals of the summer programs is to have “fun with a purpose.” Educational assistance activities are coupled with field trips around the region to provide additional enrichment opportunities for the students.

Nine students from the Silver Spring club and two youth from the Annapolis club traveled abroad earlier this summer. The Silver Spring group, along with two BGCGW staff members and a volunteer who is also a pediatrician, journeyed to South Africa for nine days to learn more about HIV/AIDS prevention. The Annapolis duo went to Scotland for a leadership program.

CALVARY BILINGUAL MULTICULTURAL LEARNING CENTER
Children and youth at Calvary will be sharing their stories by participating in the “Art of Storytelling” summer program. Offering a combination of academic, arts, literacy, recreational, service learning, and technology-supported enrichment activities, the program serves approximately 200 participants from June 27 to August 20.

Using the resources and talents of students, staff, families, and community partners, each student will articulate their ideas and visions through song, dance, poetry and prose, drama, and the visual arts. Edna Cavalleros, a participant, said, “We have accomplished so much in the first week, the next seven will be fun."

Additionally, youth ages 13–18 will engage in activities that foster leadership, creativity, and the acquisition of job skills. The Sister to Sister program will run a multimedia workshop for girls, ages 9-13, and a group of 12- to 14-year-olds will work at the Center for small stipends to help build stronger financial, workplace, and interpersonal skills in a safe and nurturing environment.

HEADS UP
Executive Director Darin McKeever says, "The summer is always the emotional highpoint of our year. Our team works so hard year-round to see that our students have a rewarding and safe summer that opens their eyes to their own potential."

Heads Up staff wants approximately 900 students to have that kind of summer this year as well. In addition to students ages 5-13, 50 high school students are employed as “junior tutors” in this academic enrichment program, scheduled for July 6 through August 10.

The culmination of the summer is the annual Project Fair where students, parents, staff, and partners gather to celebrate the accomplishments of the summer, acknowledge partners, and thank all supporters.

LATIN AMERICAN YOUTH CENTER (LAYC)
LAYC provides a diverse menu of opportunities this summer. Summer Youth Employment Programs, serving a total of about 180 participants ages 14-21, run July 12 through August 13. Both programs provide courses and workshops that help students develop work skills and increase employability.

The two Ben & Jerry’s Partnershop locations provide job training for another 34 youth and an Upward Bound cadre of 42 ninth through twelfth graders are spending three of their six week program in residence at George Washington University.

Almost 300 elementary students, grades K-6, are also participating in summer enrichment camps in two locations. With academics in the morning and field trips in the afternoon, students are busy from 8:30am to 4:30pm, Monday through Friday.

MARY’S CENTER FOR MATERNAL AND CHILD CARE
The ProUrban Youth (Urbanitos) Program is a mentoring, employment training, and personal development program serving 35 teens this summer. Program Director Sara Marques said, "Mary's Center had more than 50 applications for 35 slots and it is breaking our hearts to turn some of them away. However, we have selected a great group representing a variety of ages and experiences—some with peer educator experience and others who are budding leaders—and it will be wonderful to work with them. When I told Macy and Raul (two participants) that they were accepted into the Urbanitos program for the summer, they were jumping around the office, they were so excited."

Urbanitos explore careers in health care by working alongside medical, social service, or administrative staff at Mary's Center two days per week. They build job-related skills, responsibility, and professional development. They also receive training and become peer educators on healthy sexuality, alcohol, tobacco and drugs, nutrition, communication skills, decision-making, and self-esteem. They educate their peers at school and at Mary's Center’s twice-monthly teen clinic. In addition, Urbanitos develop health awareness campaigns and advocate for healthy behaviors in their communities.

The other summer program, Homework Helpers, wasn’t supposed to be a summer program. The Wednesday afternoon mentoring/tutoring program was a pilot this past school year for 20 children at Mary’s Center. Students were matched with adult mentors who worked together on homework and reading skills. Staff thought the program would take a break over the summer and then expand in the fall with more student/mentor pairs meeting more days. Participants had different ideas. “The kids and mentors just wouldn’t ‘rest’ for the summer; they didn’t want to stop,” said Vice President for Development David Bender.

SEE FOREVER
A unique part of life at See Forever is the summer exposure program for Maya Angelou Public Charter School (MAPCS) students. The summer begins with a farewell to graduates and continues from July 6 until August 13, with rising MAPCS seniors participating in half-day SAT prep sessions while holding down part-time internships with companies and nonprofits throughout the city. Rising juniors also participate in full- and part-time internships along with academic enrichment classes.

Students also participate in College Summit sessions. "Not only does College Summit help students with the physical aspects of applying to college (personal statements, financial aid forms), but it influences student enthusiasm and organization about the process," said Jamie, who teaches two periods of Senior Transition, a class that helps students make post-high school plans and complete the college application process. "College Summit took [MAPCS student] Robert's excitement and put a structure around it. He's already asked if he can send his application in now."

Select students from both grade levels participate in summer exploration programs, both within the US and internationally. These trips give students a view of life beyond DC, as well as an incentive to continue studying and working hard. Danielle, a rising senior, went to Australia last year and will be traveling to a number of European countries this year. She says, "People make assumptions about me every day, about my sexuality, my school, the sports I play, and my intelligence. For example, when someone asks me what school I attend, I say Maya Angelou. They automatically think that I have been in jail for doing a crime. But if people get the chance to recognize, like I did in Australia, that we are more alike than different, they understand each other, communicate better, and help each other out. I went to Australia through People 2 People, a program whose mission is to get students to learn about other cultures. For the future this means more peace."

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CMHS Seminars: Multiculturalism, Torture Survivors

VPP investment partner The Center for Multicultural Human Services (CMHS) is collaborating with the Mental Health Association of Montgomery County on "Multiculturalism at its Best," a half-day seminar on July 13 from 8am to 12pm at the University of Maryland Shady Grove campus. CMHS Executive Director Dr. Dennis Hunt and his staff will be speakers.

CMHS also convened a conference on June 7 with The George Washington University to spotlight the need for competent and sensitive service provision for survivors of torture. Participants from neighboring states heard from experts in the areas of psychology, medicine and immigration law, including CMHS Director of Program for Survivors of Torture and Severe Trauma Dr. Judy Okawa, and Board Chair Dr. Tom Connally.

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As a child growing up in New York City, VPP investor Art Marks had a ringside seat watching the ups and downs of being an entrepreneur. His father had invented a manufacturing process that he turned into a highly successful company that later went public. Along the way, Art came to understand the journey that each entrepreneur takes, their motivations and drive, the challenges they face, and the kind of assistance and resources they need to be successful. That knowledge has been invaluable in Art’s career as a venture capitalist where he is known for his savvy investment decisions as well as his skill in developing entrepreneurs.

Art is a founder and general partner of Valhalla Partners, a Vienna, Virginia-based venture capital firm with $177 million under management and specializing in early stage IT companies. Prior to starting Valhalla Partners in 2002, he spent 18 years at venture capital behemoth New Enterprise Associates (NEA).

Despite his early introduction to entrepreneurship, a career in business was not a foregone conclusion. In fact, Art initially thought he wanted to be a veterinarian. After graduating from high school, he spent a year in Israel living on a kibbutz and working at the Tel Aviv zoo. He quickly realized that veterinary medicine was not for him. He came back to the states and enrolled at the University of Michigan where he studied bioengineering.

His college years coincided with the Civil Rights movement, in which he became very active. With five other students, Art participated in protests in Montgomery and Selma, Alabama, an experience that he says changed his life.

“It opened my eyes that things were not so simple. I saw white people on horses hitting people and I also saw white people, who I thought were the bad guys, helping people out. It made me see the shades of gray and try to avoid polarization.” He also had the opportunity to meet Dr. Martin Luther King, Jr., and his eyes lit up as he described Dr. King’s ability to inspire people.

After college, Art went on to Harvard Business School where he was a Baker Scholar. He decided to go into health care as he saw it as a chance to do well and do good. His first position was at Baxter Laboratories as assistant to then president Bill Graham. Graham sent Art to a company in Silver Spring that Baxter had recently acquired that made heating elements. With Art’s guidance, they reconfigured the product line and turned what had been a losing company into a winner. Art went on to hold a number of senior positions in marketing, sales, and finance at Baxter Laboratories. His success at Baxter caught the eye of General Electric recruiters. After interviewing with legendary Jack Welch, Art says his view of GE as a stodgy, bureaucratic company changed and he decided to join GE. “Welch was both strategic and operational. How you think about solving problems was valued and achievement was rewarded.”

At GE Medical, Art helped to market GE’s CT Scanner and ran the X-Ray products business. In 1979, he moved to GE Information Services in Rockville, MD, where he was senior vice president and president of the software products operation (GE Information Services).

In 1984, he decided to go into the venture business, joining New Enterprise Associates (NEA) as a general partner with the launch of NEA III.

“It was a dramatic time to be in venture capital—we had seven years of poor returns followed by 10 years of great returns and then one to two years of trauma,” he says.

Art likens his work as a venture capitalist as a kind of “travel guide,” helping entrepreneurs on their journey to fulfill their goals. And that similar approach—guiding social entrepreneurs to their goals—is what attracted Art to VPP.

He first met Mario Morino in the early 1990s while doing some due diligence on Peter Barris whom Art recruited to NEA and who is also a VPP investor. Art and Mario subsequently have become good friends and served together on the Board of the Mid-Atlantic Venture Association (MAVA).

“With VPP, Mario offered an interesting approach to philanthropy and a thoughtful and thorough process,” he said. “I liked the idea of investing in a few organizations and applying the best practices of venture. It’s a working experiment that I am happy to be part of.”

As far as his own philanthropy, Art says it continues to evolve. He and his wife, Nancy Casey, are very interested in education, especially in supporting ways to develop good teachers. They actively support the Maret School where their two younger children attend, as well as Harvard Business School, two institutions that have made a huge difference in their lives.

Nancy and Art form an unusual partnership. Art met Nancy when she was in the venture business. Nancy is also in the money management business and manages a fund that invests in publicly held emerging growth companies. While they don’t always agree, we’ve heard their dinner conversations are always lively. Art and Nancy both believe the best way to give back and to make the Washington region a better place for everyone is to focus on helping all children secure a viable and broad education.

He is pleased that his children are also finding ways to give back. His oldest son, Josh, launched a new venture in 2002, Goldstar Network LLC, which provides business and financial services consulting for charter schools. The effort combines his entrepreneurial spirit with the strong sense of social justice that seems to run in the family. As for his younger children, Art says he is delighted that their classes at Maret take social responsibilities seriously.

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Philanthropy News Online is a bi-weekly e-newsletter produced by the Association of Baltimore Area Grantmakers. Philanthropy News Online highlights recent articles and information on philanthropy in the area, requests for proposals from area grantmakers, announcements about new reports or publications in the field, and other philanthropy-related news.

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