Impetus works as a kind of charitable private equity fund. It raises cash from private and corporate donors, and uses this money to leverage further sums in grants from charitable foundations, and also pro-bono expertise from volunteers. It is still relatively small, but it has attracted much attention. That's in large part due to its effectiveness: the seven organisations it has been involved with the longest have seen their income grow 23 per cent a year - six times the sector average. And partly, one suspects, due to the efforts of the hardworking, and very media-friendly, Barone Soares.
Barone Soares grew up in Sao Paulo, and remembers deciding at a tender age that she wanted to make a lot of money - and give it back to society. She began volunteering when she was 12, helping the elderly and encouraging orphans to put on plays, an experience that left a lasting impact. Later, a degree in economics was followed by a stint at Citibank in Sao Paulo, a Harvard MBA, then corporate finance at Goldman Sachs, before she became a vice-president with BankBoston in charge of private equity deals.
Then, she says, ‘something started to bug me inside'. She asked herself: ‘How long are you going to wait before you make the jump from business, and start fulfilling your dreams? The actual discussion with myself took a few years, but then I had an opportunity to work on environmental funds in the UK - so I leapt.'
Soon afterwards, she moved to Save the Children and a new job with the ‘weirdest of titles': head of institutional support. ‘I was responsible for supporting the international relationships, corporate partners, trusts and foundations, and the alliance of the 29 Save the Children operations throughout the world, all of which directed their funds through the charity's UK headquarters.
‘The first thing that stunned me was the pay. I was now earning less than I paid in tax in my job in private equity. I was so flabbergasted by everyone else's salary. I couldn't believe they could live in London on such wages. But I was also stunned by the motivation of my team of 20 super-dedicated individuals, who worked really hard. I soon learned that leadership in an NGO is incredibly difficult, and that, because salaries aren't high, people won't work for you if they don't respect you. I was leaving so much money behind that, having made the change, I was absolutely determined to make a difference. My colleagues would tell me I was working harder than I worked in private equity and it is so true.'
Having completed her three-year plan at Save the Children in just two years, serendipity took over. Impetus Trust was then a new venture philanthropy fund operating in the same building as a conference Barone Soares was attending. She ‘had a chat' with two of the founders, Natt Sloane and Stephen Dawson, applied on the last day for applications and got the job.
One challenge was swapped for another, introducing and adapting private equity skills and disciplines into the UK charity world,
and proving their worth. Impetus's first fund raised £10m, a third in cash from the founders, a third from corporate investors, trusts and foundations, plus a third made up of pro-bono skills, audited at the daily rates that the volunteers would normally charge.
In a world where charities find it difficult to get long-term support, Impetus attracts 200 applications a year. It will visit or have exploratory meetings with 30, and ultimately invest in just one. As an investor, Impetus looks for three things: an inspiring CEO; an ambitious business model that makes sense; and work that has the potential to be scaled up, if possible throughout the UK. The support then given is hands-on, as Impetus becomes an active and involved partner.
Impetus works because its approach is business-like and develops as a partnership of equals. Impetus backs a business plan for growth with set milestones and then provides the necessary funds over a period of years, together with professional skills to help achieve them. It appoints an investment director, who meets the CEO at least once a month, and is in contact even more regularly. There's further support from at least 16 senior executives, drawn mainly from private equity, banking and consulting. A hedge fund manager is currently involved in helping Impetus develop its own future strategy.
Impetus now aims to raise £30m by 2012, following the same model of a third cash, corporate investment and pro-bono professional time. For every pound of cash invested they leverage an additional six pounds of company investment and pro-bono help.
While the original fund focused on disadvantaged communities, the new funding round will support the economically disadvantaged and have more specific outcomes. It will be looking at measures such as improved employability and skills, higher attainment, and education. It will measure the impact on society when someone who was one of society's liabilities changes to becoming, or having the potential to become, a contributor. It will also support the charities in scaling up their work, by replicating successful programmes UK-wide.
Two of Impetus's first investments, St Giles and Speaking Up, are approaching the end of their Impetus involvement. Both are growing. In the charity world, of course, the ‘exit' is different. There are no IPOs; no money is made. The exit has become known as ‘the graduation'. The aim is to leave a charity in a position where it can continue to grow without Impetus in a sustainable manner. Its income is more diversified, so it has the resilience to carry on even if a major funder pulls out (always a danger with statutory funding). And Impetus considers that part of its role in the final year is to help prepare the charity for its exit.
A couple of recent examples illustrate the variety of causes with which Impetus has become involved. Into University works with children and young people who are at risk of under-achieving. There's a strong link between being born into an ethnic minority - and/or being socially deprived - and being under-represented in higher education. These kids generally don't think about going to university: their aspiration level is low, and there's little encouragement for future success. Into University identifies schools to collaborate with and offers after-school academic support, focus weeks, days and weekends, mentoring with undergraduates, visits to colleges and aspirational training courses. The results are very encouraging. Impetus is now helping Into University roll out a model which is already proven to other areas of England. The overall investment is being made by four partners, including the high-profile educational charity Sutton Trust, with the Impetus contribution valued at £500,000 over four years.
You're probably aware of Fairtrade. It's a success story that asked Impetus for help when it was growing at 50 per cent a year and badly needing a strategy. Impetus is providing a package including funding, expertise and co-investment with a mix of consultancy and funding from the Charities Aid Foundation. Impetus has also focused on helping Fairtrade maximise its social impact. One of Impetus's pro-bono partners, OC&C Strategy
Consultants, has carried out an extensive study to identify further growth potential. This includes consumer and licensee research; a market review to establish which commodity groups offer the greatest growth potential; and a current market share review.
Barone Soares obviously gets a buzz from linking wealth to good causes and she enthuses about all her investments. She explains how St Giles helps to prevent re-offending by addressing root causes (statistics show that 75 per cent of people released re-offend). Given that it costs society almost £200,000 to recapture, put on trial, and re-incarcerate for a year, helping St Giles is a no-brainer. Perhaps because of her international background, she's a passionate personal supporter of Fairtrade - and also Camfed. She would love to go to Africa and see Camfed's work, or see Fairtrade in action in Latin America (and if anyone from Camfed or Fairtrade is reading this, you should take her and I am volunteering to come too!).
So there you have it. An intelligent woman, who is out to charm and persuade hedgies and others to invest in charity in an intelligent way, and to see a great return. Demonstrably, this is an investment that works.
Mike Dickson is a philanthropic adviser and author of ‘The More You Give, the More You Get'
