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By Susan Mackenzie
Demeter, the Greek goddess of the harvest, is credited with teaching humans how to grow and preserve the fruits of the soil. She is also a fitting name for the French venture philanthropy organisation founded by Pascal Vinarnic and a group of friends in 1995.
Seeking to play an active social role in their communities, the founders initiated a joint project which led to the creation of Fondation Demeter, a public benefit foundation under the auspices of Fondation de France. The founders, a group of professionals working in finance, consulting, industry and media, wished to help non-profit organisations increase their financial autonomy through the development of professional management practices and financial support targeting the development of income-generating activities.
Financed exclusively by its founders, Demeter focuses on organisations involved in humanitarian, social and cultural work, but does not limit its investment scope geographically. Non-profits receiving support are based as close as Paris and as far away as Bangalore and Buenos Aires. Its ‘investees’ tend to be new initiatives and/or innovative in their field of activity. Since its inception, Demeter has supported directly or indirectly around 40 non-profit organisations, which themselves support a total of 50,000 beneficiaries.
Demeter’s main investment criterion is the potential social impact of its funded programmes, which it assesses on the ground by tracking social data, such as school attendance, existence of vaccination and nutrition programmes or housing quality. To achieve the intended social impact, Demeter seeks out those NGO leaders who are, according to Pascal, “utopian but pragmatic enough to execute, and who are both amenable to and capable of change.” To enhance its effectiveness, Demeter leverages its funding by supporting intermediary organisations (such as Planet Finance or Interaide), which can offer a field presence or bring additional funds or subsidies, or both.
Relationships with ‘investees’ typically last about seven years, often beginning with advisory assistance and progressing to financial support after six-to-twelve months. In general, a standard three-to-five year financial investment of €5,000-€20,000 per year per project comprises an interest-free loan (typically 80% of the investment) to support the operating programme (such as to the microcredit fund of a microfinance institution) and a grant to cover part of the programme’s overhead costs (typically 20% of the commitment). Before investing, Demeter estimates when the organisation will become self-sufficient, and is clear from the outset – by writing it into the contract – that it intends to exit the investment within a certain time period. Exit can take several forms, including a refinancing of the investee, purchase of the loan portfolio or an instalment-based repayment scheme.
Prior to forming Demeter, Pascal was a partner with Bain & Co in London and Paris from 1984 to 1992, when he left to found Ceres Finance, a company providing financial services and turnaround consulting to private equity investors. He spent six years convincing people that “microcredit could work, and that underprivileged people were reliable and a reasonable risk to finance.” Yet while recognising that the French tend to eschew mixing money with charity, he is optimistic about the outlook for venture philanthropy in France, pointing to France’s enduring culture of association work and the recent involvement of a younger generation of donors, who more readily welcome new ideas and new ways to get actively involved. Pascal notes: “Venture philanthropy should be a good platform for these younger donors, as we can provide them with the appropriate tools to invest and work from. That should keep us busy for the next 10-20 years at least!”
This article first appeared in EVPA NEWS, Issue 4, Autumn 2005.
