Source: Jim Roberts, special to WRALTechWire
What is a philanthropic, for profit venture fund? Not exactly an oxymoron, but it could be a bit confusing if you were not familiar with the new concept of venture philanthropy or Program- Related Investments (PRI).
The North Carolina Biotechnology Center, NC BIO, Southeast BIO and other regional biotech organizations from Florida, Virginia and Georgia led one of the first regional conferences- the Southeast Venture Philanthropy Summit – for this new concept. Venture Philanthropy is where mostly non-profits make equity investments in early stage life sciences companies to both advance the novel science and attempt to fund the future of the non-profit.
A prime example: nanotechnology firm Liquidia Technologies, which is based in Research Triangle Park. Although the company was not discussed much on stage at the event, the company is widely seen as the most familiar story with this scenario. The Bill and Melinda Gates Foundation made a $10 million equity investment in 2010 after founder Joe DeSimone met Bill Gates at a conference. This was an equity investment by the non-profit where the foundation now owns a part of Liquidia and will financially benefit if Liquidia has an exit event due to an acquisition or an Initial Public Offering (IPO) on the stock market.
The Bill and Melinda Gates Foundation now has a $1 billion fund to do this kind of investing. (Melinda Gates attended Duke University before going to work at Microsoft.)
Do Well by Doing Good
The easiest way to explain the concept of venture philanthropy is to say: ”Do Well by Doing Good.” This concept was repeated several times throughout the conference at the Friday Center in Chapel Hill, North Carolina. If a non-profit invests a small percentage of their foundation towards an equity investment into an early stage company with new promising technology, two good things can happen.
First, the novel science and research gets funded and hopefully progress is made towards the purpose of the non-profit to solve problems in cancer, diabetes or rare diseases.
Second, if the science proves to be successful and the company can turn that into a profitable venture, the company will likely get acquired or have a public offering. If that happens and the philanthropy receives a good return on their investment, they can then reinvest that gain into the non-profit, like an “evergreen fund”, to do more good work in the near future.
While venture philanthropy is only about 2 percent of current research funding overall, this is an important needed section of investing at the earliest stages. Venture Philanthropy can come in at the early stages after grants and before angel investors and venture capital that are trending towards later stage investing. Venture Philanthropy can serve to reduce risk and serve as a qualifier for venture capital as the companies and the technologies mature.
Partners: The Company, Academic Institutions, Non-Profit Backer
To shed light on the process, four female venture philanthropy executives spoke on “The Why & How To Work with Venture Philanthropies.” According to Kristin Schneeman of FasterCures, Venture Philanthropy provides “financial, intellectual and human capital to the companies that they work with. The funds are supposed to be used towards capacity building, not towards general operating expenses.”
Louise Perkins of the Melanoma Research Alliance and a 1981 graduate of the University of North Carolina, explained that there are typically three partners in this kind of deal. The industrial partners, the academic partners and the non-profit partner that provide the seal of approval of peer review.
NC Examples of Non-Profits Showcased
In a recent panel about cancer funding, two NC non-profits and true brands and legends of North Carolina spoke about their experience. The Jimmy V Foundation CEO Susan Braun and Max Wallace of the Accelerate Brain Cancer Cure discussed their experience in funding and their part in the venture philanthropy industry.
While the high profile Jimmy V Foundation, who partners with ESPN, is not a true venture philanthropy fund as they do not take an equity position, they do partner with and fund the Accelerate Brain Cancer Cure (ABC2) organization, Braun said.
Wallace, a thirty year veteran of the North Carolina Biotechnology sector, gave the most interesting example of a new trend. The 1,000 Coupon Project is where the ABC2 foundation will give 1,000 people a single coupon to have their brain tumor sequenced for free at the expense of the foundation. This is typically a $60,000 treatment that only the very wealthiest of people can afford. While this is in the very early stages of development, the foundation has ten samples to begin the research.
Jim Roberts was involved in starting technology entrepreneur bootcamps in Charlotte in 2000, started the entrepreneurial council and angel investor network in Asheville and has worked for NC Department of Commerce and Center of Innovation for NanoBiotechnology (COIN) since moving to the Triangle in 2008. Jim is founder of RedSpire Connections, a consulting firm for business development, lead generation, marketing and a leader of industry related events.
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