For me, some of the best insights about why and how our model works come from the leaders of our investment partners—the nonprofit organizations who are working daily to improve the lives of children. Their thoughts and observations point to a number of aspects that distinguish and are critical to making our investment approach work.
It’s about Deep Investment Analysis
A hallmark of our approach is how we select the nonprofits in which we invest. We spend months, sometimes more than a year, in discussions with an organization to understand its mission, leadership, organization, and potential. And, the investment analysis and subsequent due diligence are rigorous, detailed, and unlike any process the nonprofits typically have experienced before. Our professional investment team and expert advisors spend hundreds of hours on the analysis and selection process.
It’s about Leadership
We invest in great leaders to help them build strong, high-performing nonprofits. It is central to our mission and approach to do everything we can to help the leadership and organization take the steps necessary, regardless of the degree of difficulty if it is warranted, to achieve their aspiration to benefit children and youth rather than to change an organization’s mission or aspiration or be a “social engineer.”
As James Forman, Co-Founder of See Forever Foundation, noted, “What was really important to us was that they were not saying, ‘we at VPP know what to do.’ They were saying the opposite: ‘YOU know what to do but we can help you do what you do better, more effectively, and with more kids.’ They started by telling us that we are investing in your organization because we believe in you as leaders. It was an affirmation from outside experts who could be doing a lot of different things with their money that what we were trying to do made sense and that we were good leaders.”
VPP also challenged him and Co-Founder David Domenici to become better leaders. “[VPP] forced us to really examine our own practices as leaders. It was just constant critical self-reflection and some of which was hard because sometimes you don’t want to be told that, well, maybe the way you’ve been doing it isn’t the best way, or that at least you should think about it, and they forced us to constantly to do this and it was, in the long term, very rewarding,” he said.
It’s about Relationships
At the core of our approach is our deep web of relationships. First and foremost is the relationship we have with our nonprofit investment partners where we strive to be seen as a trusted advisor. This is something that takes time—often a year or two—to develop and that we must earn. Forman recalled that when he and Domenici first started talking with VPP, they weren’t sure it was a good fit. But they kept talking with us (and we with them) for more than a year.
“Over time the relationship deepened and we started to trust the people that worked at VPP. We saw that their commitment to kids was serious, deep, and not going away,” Forman said.
That level of trust must be there. To do the work of helping organizations grow and change requires a strong relationship. Lori Kaplan, Executive Director of the Latin American Youth Center, described it as a “leap of faith” because VPP challenges organizations to work in new and different ways, ways that at first feel uncomfortable and even scary. They have to trust us and they have to trust themselves. Only when that trust is established are we able to add value beyond our financial investment through advice, guidance, and leverage.
It’s about the Power of Networks
Coupled with our relationship with our partners is our extensive network of relationships within the community at large—our investors, local government, social service and educational agencies, community leaders and influencers, the broader business community, and the philanthropic and foundation communities. Through our relationships, we are able to connect our investment partners to people, expertise, and resources that help them in their ongoing efforts to better serve children and families.
As JB Schramm, Founder of College Summit, puts it: “What sets VPP apart from all other funders that I’ve worked with is the second P in VPP—the partners. What VPP understands, at least for organizations that are trying to do systems change, is that it takes networks in the community at many different levels to successfully pull the levers and align the institutions so system change can be possible. At VPP, we have a partner who not only gives us guidance in planning and strategy but works a whole personal network to help us identify the partners…and to help, really shoulder to shoulder, figure out how we can get the community aligned around system change.”
It’s about Making the Greatest Impact
VPP invests in helping organizations achieve their aspirations, not advance its own social goals. We look for nonprofits that are having a profound impact on children and families in communities. We have invested in several types of organizations—health care, youth development, and charter schools. A large percentage of our portfolio today is charter schools. The reality is that we are agnostic to various forms of K-12 education. We didn’t invest in those organizations because they were charter schools, but rather because they were nonprofits having real impact in improving the lives of their students. We see value in all kinds of organizations. The bottom line for us is the desire of the organization to scale its impact and the comprehensive and holistic approach these nonprofits take.
It’s about Funding What Others Do Not
VPP provides the kind of funding that is the most difficult for nonprofits to get—funding for infrastructure to strengthen the organization. We typically invest several million dollars over a three- to five-year period. This money is not for a single program or service. Rather, it is explicitly targeted to help its leadership build a strong organization, poised for the long-term to demonstrate tangible results and impact. To make this happen involves hiring and retaining the best talent; building strong engaged boards; developing stable financial and economic strategies and models; improving program service and quality; and creating the means to assess and report on performance, ultimately allowing the organization to manage its outcome achievement.
“The end result of VPP investment truly has made a difference in the quality of the organization and that equals the quality of what the young people are getting. Our programs are so much stronger because of the capacity that came to the organization to do the work…the better we are, the better the young people’s opportunities are,” Kaplan said.
It’s about Performance
We help investment partners undergo a rigorous and intensive four- to seven-month business planning effort that involves key stakeholders. The result is a high-level plan that clearly defines aspiration, strategies to achieve it, and key organizational actions. Annual milestones, mutually agreed upon, are developed and become the basis for performance and assessment. The milestones are defined in terms of outcomes for children, such as improved graduation rates or the establishment of new centers in areas of high need or establishing a chief operating officer function to improve operational discipline. In addition to almost constant interaction, there is a formal annual review process in which performance to milestones is assessed, with the year’s accomplishments, performance, concerns, and expectations communicated to management and board. This provides a strong sense of accountability within our investment partners and, in turn, provides the basis for how we report portfolio performance and achievement to VPP investors.
“The real value and significance of what a business plan can do for us really became very clear to me. The Youth Center got an amazing five-year blueprint for our growth and development and a focus on the main things we should work on. It never was and never will be a document gathering dust,” said Kaplan.
It’s about Strategic Assistance
In my discussions with investment partners, nearly all of them point to the strategic assistance that VPP provides as important—and sometimes even more valuable—as the financial support we provide. This assistance takes many forms, including providing counsel to and developing leaders, board development, sourcing talent, opening doors to a new funder or partnership with a government or private agency, and being a sounding board for the leadership.
As Forman described, “VPP also brought a network of supporters and funders to our little small corner of the world. They brought board members…and a whole range of expertise, starting with money but not exclusively.”
It’s about a Professional In-house Investment Team
For our investment approach to work, our team must have seasoned, experienced executives—individuals who have themselves lived the “learning fields” of management and organizations, have built or led organizations themselves, and who have “been there and done that.” The investment team certainly must be knowledgeable about the nonprofit world and its unique culture and nuance, something we understand better now than when we started. Even more important, the team must possess sound judgment; have the experience and gravitas that enables them to advise and influence very strong executive directors and board members as they confront and deal with the most difficult organizational/managerial problems; be effective in setting clear expectations and firm, but respectful, in ensuring they are met; and have the heart and wherewithal to earn the role of trusted advisor to the leaders we serve.
Perhaps one of the most gratifying things for me is how much our nonprofits partners value the talent and commitment of our team.
“It’s an extraordinary level of leadership that the VPP partners bring to the table. VPP has partners that aren’t just advisors, they’ve got skin in the game, and they are here to connect with their networks and to help us strategize. And they’ve got the experience and they’ve got the relationships, so that they can actually do this well,” Schramm said.
As I reflect on how we implement our investment approach, what stands out for me is that we forge deep partnerships that allow our nonprofit partners to fulfill their dreams and realize their mission to improve the lives of children and families. VPP provides a level of funding and other resources that are very hard for organizations to come by. Our approach is not right for every organization. But for those who are willing to make the journey with us, it is rewarding for the organizations, the families and children they serve, and for us as professionals.
Kaplan sums it up this way: “VPP is different from other funders because they are engaged in a way most traditional philanthropy is not. I think all philanthropists, when they give you a grant, want you to be successful. But an investment philanthropist, as I am understanding it now, wants to roll up their sleeves up with you and kind of walk that journey, and together through that partnership really address the issues and provide expertise that’s just invaluable [and] that we would not have known about through the traditional philanthropic relationships that we have had.”
