The use of venture philanthropy (VP) as a tool to improve people’s lives through engaging with their basic social and welfare needs, such as education, housingand food and water, is clear.
There is, however, an increasing attention on how VP can help improve people’s health with a range of funds and programmes being developed, albeit all in the shadow of the giant Bill and Melinda Gates Foundation’s work on communicable diseases, such as malaria, funded by a $33.5bn endowment from the Microsoft founder.
Last month, the McGovern Institute for Brain Research agreed to set up an institute in Beijing at Tsinghua University to complement a fund at the Massachusetts Institute of Technology (MIT).
Patrick and Lore Harp McGovern, the husband and wife behind US publisher International Data Group (IDG), said they would donate $10m to establish the China institute and support its first 10 years of operations, with matching contributions from Tsinghua.
To ensure its longer-term future, the agreement also provides for the establishment of two foundations, the IDG China Foundation and the Harmony Foundation, that will raise additional funds, with help from IDG, for the institute’s eventual endowment.
Hugo Shong, founding general partner of IDG Capital Partners, the China-based corporate venturing unit of IDG, will head both the IDG China Foundation and the Harmony Foundation, a charitable organisation set up by IDG Capital Partners.
Shong, who with his colleagues has already pledged more than $2m to the McGovern Institute to support collaborative programmes with China, said: "My colleagues and I greatly admire what Pat and Lore have done with the McGovern Institute for Brain Research at MIT. "We are delighted to see that they have chosen Tsinghua to be the first international centre for brain research in our home country of China, and we are happy to assist its future growth as well."
In 2009, Jonathan Simons, executive president of the Prostate Cancer Foundation, said there was a VP model pioneered at the foundation and adopted with demonstrable success by other philanthropic organisations supporting research, including the Lance Armstrong Foundation (testicular cancer), the Michael J Fox Foundation (Parkinson’s disease), the Multiple Myeloma Foundation, the Melanoma Alliance and others.
Simons said: "Applying the principles of venture philanthropy more broadly – preferably, and most expediently, through extant organisations – should maximise the value returned on our research investments."
This complementary approach of private equity and venture capitalists giving their time and skills to research institutes and medical practitioners has already been seen in the US.
Flatley Venture Capital aims to provide between $200,000 and $2m to support biotechnology start-ups that might otherwise be unable to develop technologies for cystic fibrosis. However, Flatley was reported as expecting only to break even with investments from the fund.
In Europe there are a host of groups working the collaborations, including by the Fundació Pasqual Maragall, a new member of the EVPA, Fondation Fournier- Majoie pour l’Innovation in France and Italy’s Fondazione Filarete.
Stephen Gutzeit, executive director of Germany-based foundation Stiftung Charité, which is named after the Berlin-based medical school, launched a €24m venture philanthropy fund in November. Independent venture capital firm Peppermint, which unlike most German VCs is an entrepreneurial team rather than risk-averse former bankers, according to Gutzeit, manages the fund.
Stiftung Charité has committed €2m to the fund out of its €25m endowment, with the rest invested in bonds to provide a yield that goes on annual grants.
Gutzeit said: "The venture investments support companies after they have started and when grants are not allowed. It extends our reach.
"We look for triple bottom- line impact, a financial return and medical returns, over the longer term. What is also part of the impact is seeing others copy our model so we provide documents and a tool box to assist this.
"However, the most worthwhile changes are changes in culture and organisation rather than short-term metrics, and so we take big bets on good people."
This approach has been supported by others. Michael Milken, founder of the Milken Institute where Gutzeit spoke last year, has said: "In the four decades of philanthropy that have parallelled my business career, I have found that the same principles apply whether you are providing access to capital to grow a business, creating a new paradigm for medical research, or pioneering innovative approaches to education – empower the most talented people in each field and encourage them to pursue their passions."
And Geoffrey Love, team head of venture and equity long-short at the $25bn medical endowment Wellcome Trust in the UK, said most of Wellcome’s money in venture capital was still through funds but "an increasing part is co-invested alongside trusted venture partners".
He said its venture deals were generating an unexpected benefit for the rest of the organisation, which uses the financial returns from its assets to provide grants for medical research. He said rather than provide grants to scientists researching specific areas, it was pursuing the greatest minds and then giving them the flexibility to see what they discovered.
The collaboration and flexibility is increasingly needed as the traditional model of funding research and development in medical sciences comes under pressure due to government cuts and the relatively high cost of bringing treatments to market.
Matthew Cooper, a professor at the Institute for Molecular Bioscience, and David Shlaes, a former vice-president at Wyeth Pharmaceuticals, have said a phase III clinical trial for an antibiotic’s effectiveness against a single disease costs about $70m, while the number of pharmaceutical companies researching new antibiotics has been reduced from 18 to four in the past 21 years.
There have been only four new classes of antibiotics produced in the past 40 years. Without health, there can be little other social good to be done.
Editor’s note: the author is also the pro bono editor of the European Venture Philanthropy Association’s monthly newsletter