Venture Capital Buys Social Stock

    GRAND RAPIDS — Using venture capital for philanthropy? Now, that’s a new twist on a cap story.

    But it will become old hat if the Grand Rapids Community Foundation (GRCF) and 56 local businessmen and women have anything to say about that idea, even though the return on their investments won’t take the form of rising stock values. Instead their ROI will come from knowing that the social stock of the community will rise.

    GRCF recently designed and launched a new program that uses the principles of venture-capital investing to raise funds for nonprofit groups in West Michigan. And right out of the box, the effort can be considered a success.

    The program, Social Venture Philanthropy (SVP), raised $112,000 for four local charities from 56 self-starters and professionals.

    Foundation Donor Relations Director Lon Swartzentruber explained that SVP was aimed at baby boomers who often have money and talent to contribute, but just as often may not have the time or experience to evaluate charities in order to make informed giving decisions.

    “We created SVP to help engage these folks in community-based giving through a program that’s very efficient and very results-oriented,” he said.

    “Because we have an 80-year history in Grand Rapids and know the local nonprofit groups intimately, the Foundation can help these new philanthropists identify quality programs and invest charitable dollars wisely,” he added.

    Swartzentruber said SVP is loosely modeled after a similar concept done by West Coast software wizard Paul Brainerd. After Brainerd sold Aldus Corp. eight years ago, he started Social Venture Partners (also SVP) and financed it in the same venture-capital manner that tech firms used to get up and running in the market. His SVP, though, was targeted at a younger group — and, possibly, newer money — as he took aim at high-tech workers and their newly found wealth.

    Here, 56 entrepreneurs, business owners and professionals gave $112,000 to the initial effort, while Fifth Third Bank decided to underwrite the program’s start-up costs.

    “Supporting Social Venture Philanthropy is a natural fit for Fifth Third Bank. The bank and the Community Foundation have worked together to support worthy causes in Grand Rapids for 80 years. This program represents yet another partnership designed to benefit the entire community,” said Kevin Kabat, Fifth Third president and CEO.

    Each investor gave $2,000 to SVP and then directed the gift to education, families, health or neighborhoods, the four chartable investment areas. Then GRCF filled grants in those areas.

    Louis Padnos Iron & Metal Executive Vice President Shelley Padnos was one of those investors. Padnos got involved with SVP in February and helped put the program together by working with others like her in a small group. And her group, like the others involved, came to a simple conclusion, but one that holds plenty of truth.

    “We either give to things about which we have a passion, or we give to things about which we’re solicited. But most of us don’t have the time to go out into the community and actually research what the needs are,” she said.

    In a nutshell, that’s how venture capital met philanthropy. The investors had the money and GRCF had the resources to help assign and distribute it. And Padnos saluted the Foundation for coming to the organizational meetings with an open mind.

    “I give them a lot of credit for not designing the program by themselves in a void. They had some concepts but a lot of changes occurred to the concepts as a result of the input that they got from community members,” she said.

    “I think that was really positive and I think maybe we struck an accord with people who a lot of times want to do things, but don’t really know what to do or how to go about doing it.”

    Padnos, Mike Bieker and Sam Cummings headed the SVP Leadership Team. Bieker is the founder and president of Market Lab, while Cummings started and directs Second Story Properties.

    “It’s a great way of engaging would-be donors in philanthropy. It’s designed so someone who doesn’t have a whole lot to give can make a much larger impact by polling resources with others,” said Cummings.

    “With their $2,000 donation and the donations from their colleagues, they can make a donation within the $20,000 to $30,000 range and be a part of that decision,” he added.

    Swartzentruber reported that the money raised the first time out exceeded the goal by six investors and $12,000. That good news, he said, means the Foundation is more than likely to give SVP a second go-around next year.

    “It’s certainly our hope that it’s a continuing program,” said Padnos, “and a growing one, too.”

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