Deal Structuring in Philanthropic Venture Capital Investments: Financing Instrument, Valuation and Covenants

Scarlata, Mariarosa; Alemany, Luisa

doi:10.1007/978-94-007-2926-1_2

Cited by 10 publications

(26 citation statements)

References 72 publications

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“…As a result, although all PhVC firms seek both a social and an economic return on their investments, the connotation of what an acceptable economic return is, differs by firm. These differences depend on the legal structure of the funded social enterprise and the aim of the PhVC firm (Scarlata and Alemany, 2010). As a result, PhVC firms fall along a spectrum of social and economic return expectations, all of which is consistent with the notion of "blended value as the organizing principle of our work: using capital to maximize total, combined value with multiple aspects of performance" (Bugg-Levine and Emerson, 2012, p. 9).…”

Section: Definitionsmentioning

confidence: 67%

“…PhVC firms are professional investment firms that apply the investing practices developed in TVC (Gompers and Lerner, 2001;Tyebjee and Bruno, 1984) to fund growing social enterprises (Scarlata and Alemany, 2010). Although TVC and PhVC firms have a similar expectation for the cycling of capital -raising, investing, and scaling their investments (Gompers and Lerner, 2001) -they have different organizational objectives.…”

Section: Definitionsmentioning

confidence: 99%

“…Later work by Scarlata and Alemany (2010) define PhVC as an active investment vehicle for social enterprises that have the potential for a high social return on investment. To accomplish such a goal, PhVC firms channel resources to organizations that have the potential to grow, with the assumption that bigger organizations have a better chance of addressing the social needs of a larger portion of their beneficiaries, as well as having higher survival probabilities (Audretsch and Mahmood, 1994;Dunne et al, 1989, Haveman, 1995Mata and Portugal, 1994;Mitchell, 1994;Sharma and Kesner, 1996).…”

Section: Definitionsmentioning

confidence: 99%

“…The vast majority of PhVC firms, which have been established mainly after the year 2000, are relatively small (Scarlata and Alemany, 2010) and operate in an investment space that does not yet have epistemological boundaries and a clear institutional structure (Nicholls, 2010). As a result, although all PhVC firms seek both a social and an economic return on their investments, the connotation of what an acceptable economic return is, differs by firm.…”

Section: Definitionsmentioning

confidence: 99%

“…Dimov and Shepherd (2005) also argue that business education helps TVC principals screen deals, conduct deeper due diligence and advise entrepreneurs on strategy and operational issues, even though these authors' combined results were inconclusive on the positive impact of MBAs on firm performance. Given the body of research on human capital in TVC, we therefore expect that individuals with a technical, business or law education would be commonly found among TVC firm founders (Dimov and Shepherd, 2005;Zarutskie, 2010 If PhVC is indeed an outgrowth of TVC (Letts, et al, 1997;Scarlata and Alemany, 2010;Scarlata, et al, 2012), we would expect PhVC firms to exhibit specific human capital that mirrors TVC firm founders. Having similar human capital of that found in TVC would allow PhVC founders to properly and efficiently implement TVC investing practices, thereby increasing the probability of achieving their PhVC firms' financial objectives.…”

Section: Human Capital In Traditional and Philanthropic Venture Capitmentioning

confidence: 99%

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Ingredients Matter: How the Human Capital of Philanthropic and Traditional Venture Capital Differs

2015

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Philanthropic venture capital (PhVC), like traditional venture capital (TVC), provides funding and value added services to a portfolio of entrepreneurial firms. However, TVC differs from PhVC, as the primary goal of TVC is to maximize the economic return of its investments. In contrast, PhVC firms expect their portfolio companies to perform well in terms of both social and economic returns. Using both American and European firms, this paper explores and compares the human capital in PhVC and TVC firm founders. Our results show that there are key differences in both general and specific human capital between these firm types. While both TVC and PhVC firm founders have high levels of commercial experience, TVC firm founders tend to hold degrees in science, engineering, business, and law more frequently than PhVC firm founders. PhVC founders also differ from TVC founders by having greater work experience in the social sector.

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Section: Definitionsmentioning

confidence: 67%

Section: Definitionsmentioning

confidence: 99%

Section: Definitionsmentioning

confidence: 99%

Section: Definitionsmentioning

confidence: 99%

Section: Human Capital In Traditional and Philanthropic Venture Capitmentioning

confidence: 99%

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Ingredients Matter: How the Human Capital of Philanthropic and Traditional Venture Capital Differs

2015

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How impact investing funds invest in social‐purpose organizations: A cross‐country comparison

Borrello,

Bengo,

Moran

2023

Corp Soc Responsibility Env

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Impact investing funds (IIFs) are a type of investment fund that aims to achieve both financial and social goals, and they have become a valuable resource for social purpose organizations (SPOs) seeking capital. Our research evaluates the investment process by comparing approaches in two countries, Italy and Australia. We conducted semi‐structured interviews with 9 IIFs and 12 SPOs and used the Gioia Methodology to conduct the data analysis. We found both similar features and divergences. The investing process by IIFs in Australia is conservative, more risk averse and more profit‐oriented with a predominant “finance‐first” strategy. By contrast, in Italy there is a clear preference for “impact‐led” investment. We argue this illustrates a fundamental difference in investment philosophy and that IIFs in the two countries navigate, interpret, and understand the field of impact investment in contrasting ways. Finally, we contribute to the growing literature on impact investing by putting forward an “ideal” impact investment process that respects the integrity and peculiarities of the Social Impact Investment approach.

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Aiding philanthropic venture capitalists investing in social enterprises: A multi‐criteria decision‐making approach

Salimi,

ten Have

2024

Journal of Philanthropy and Marketing

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Social enterprises have emerged as promising solutions for addressing environmental and societal challenges. To enhance their access to financial capital and align their business proposals with the preferences of impact investors, it is crucial to understand how Philanthropic venture capitalists (PhVCs) evaluate potential portfolio companies. This study introduces a framework to assist PhVCs in making more informed investment decisions, fostering successful, long‐term partnerships between investors and investees. The proposed approach begins by determining the significance of investment criteria using the Best‐Worst Method (BWM). Subsequently, the performance of portfolio companies is evaluated, ultimately identifying the most favorable investment opportunities. We apply this framework to a Dutch philanthropic venture capitalist, and our analysis reveals that ‘Potential’ and the ‘Management team’ rank highest in terms of investment criteria importance, while ‘Assessment of the deal’ and ‘External environment’ carry lower significance. Furthermore, our approach, incorporating the BWM outcomes, considers investors' personal preferences and offers a method for ranking portfolio companies based on their value and performance.

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Deal Structuring in Philanthropic Venture Capital Investments: Financing Instrument, Valuation and Covenants

Cited by 10 publications

References 72 publications

Ingredients Matter: How the Human Capital of Philanthropic and Traditional Venture Capital Differs

Ingredients Matter: How the Human Capital of Philanthropic and Traditional Venture Capital Differs

How impact investing funds invest in social‐purpose organizations: A cross‐country comparison

Aiding philanthropic venture capitalists investing in social enterprises: A multi‐criteria decision‐making approach

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