Haas Social Impact Fund: Venturing into Venture Philanthropy: My Summer with Draper Richards Kaplan
by Jordan Lee, Haas MBA 2020
I spent my summer with the Draper Richards Kaplan Foundation, a venture philanthropy firm that supports early-stage, high impact social enterprises. DRK provides $300,000 in unrestricted capital to its portfolio companies over three years and, additionally, provides ongoing support by joining the board of directors and partnering with leadership to build organizational capacity and scale impact. DRK is a generalist firm, meaning they are both sector and issue agnostic; they invest in organizations that work across domestic and international education, food & agriculture, and social justice (to name a few). Over the summer, I supported three portfolio organizations and shadowed ongoing diligence.
Questions and Answers
Three years as a financial analyst at an education nonprofit prior to matriculating at Haas taught me several things about myself and nonprofits:
1. Intrinsic motivators are stronger than extrinsic motivators (for me, anyway). I struggled with motivation as a management consultant despite working for a reputable firm that objectively paid well and provided excellent benefits. At the end of the day I found it difficult to connect with the work, especially when that work was being done for multi-billion dollar conglomerates. Moving into the nonprofit sector, I took a pay cut to work at a relatively unknown organization. None of that ultimately mattered because I was aligned to the organization’s mission and found the work infinitely more fulfilling.
2. The finance function within nonprofit organizations is often neglected or under-developed. An excellent example: I was the first dedicated financial planning & analysis hire at an organization generating $20M in annual revenue. This is unfortunately more common than not, as I saw and heard firsthand this summer.
3. Traditional, purpose-restricted philanthropy has many shortcomings. My previous organization was a grantee of several big-name foundations in the K-12 education funder ecosystem, yet each foundation had a different agenda. In no position to turn away funding, we often found ourselves bending over backwards to appease funders, which created internal tension and changed our strategic goals.
I came to Haas to continue building a career in social impact, but there were just as many questions as there were answers.
· Education, but what else? My professional experience in social impact was limited to K-12 education in the United States. Through other personal experiences, such as service-learning trips to Nicaragua during college, I knew there were other issues outside of domestic K-12 education that deeply resonated with me.
· Funder or fundee? The idea of stepping into the role of an investor / grantor was intriguing but stepping further away from direct impact was a concern.
· What other nonprofit funding models exist? I specifically was looking for models that addressed some of the issues outlined above with traditional, purpose-restricted philanthropy.
Draper Richards Kaplan
My summer with Draper Richards Kaplan laid the groundwork for me to answer some of the key questions posed above.
Education, but what else?
Throughout the application and post-acceptance process, I was vocal about wanting exposure to organizations working across different issue areas. Most of my time was spent supporting three of DRK’s portfolio organizations:
1. Digital NEST — a workforce development nonprofit that focuses on tech career development for Latinx youth. My summer project was part of a larger scaling strategy development; I focused on constructing a framework for “how to scale,” creating a series of detailed case studies profiling analogous organizations and their path to scale, laying out key questions to be answered, and proposing a roadmap for how to proceed.
2. GreenWave — a sustainable ocean farming nonprofit that trains independent farmers to set up and operate zero-input 3D ocean farms that grow a mix of seaweeds and shellfish. I created a market entry strategy for them outlining options for where and how to enter the seaweed fertilizer value chain. The framework used for this analysis will hopefully be leveraged for other market and product opportunities they explore in the future.
3. Onward Financial — a financial wellness benefit seeking to improve short-term financial security for wage earning Americans (their target is those making $15 to $20 an hour). I focused on building price and cost models for Onward to better understand key implementation cost drivers and use those to inform pricing decisions. I also created a set of strategic and product recommendations with operational checklists for thinking through implementation of these recommendations.
Each of these projects was stimulating in different ways and got me thinking about not only the types of social enterprises I would be interested in working with post-graduation, but also the types of roles that would provide the most personal learning and growth. My key takeaway is that I am definitely open to exploring opportunities with social enterprises working outside of US education.
Funder or fundee?
One aspect of my summer experience that I struggled with was the disconnect between Summer Associate work and full-time Associate with at DRK. Whereas all of the Summer Associates focused on portfolio support (80%+ of working time), full-time Associates focus more on diligence and deal evaluation. Although I got limited exposure to the deal side (was able to attend deal team meetings and shadow several diligence calls), my gut feeling is that I would enjoy a more diligence-focused workload because it would still allow me to develop relationships with social entrepreneurs.
What other nonprofit funding models exist?
Working in venture philanthropy this summer opened my eyes to another flavor of nonprofit funding, one that is arguably more effective (particularly for early-stage organizations) by not burdening an organization with explicit funder targets and goals. Given that venture philanthropy is a blend of traditional VC and philanthropy, it pushes nonprofit organizations to think more like for-profits. As mentioned earlier, many nonprofits tend to neglect the finance function. In my opinion, finance should be a focus for any organization independent of legal designation. I really like how DRK pushes its portfolio organizations to think critically about achieving financial sustainability and create financial models and budget/forecasts that can inform and improve operations. Financial sustainability becomes critical as an organization matures because foundations tend to want to fund innovation and growth, rather than ongoing operations.
The Road Ahead
Moving into my second year, the biggest career question I have is whether to pursue post-MBA opportunities as an impact investor or as an ‘operator’ at an early-stage social enterprise (both of which can take many forms). Ultimately, I think I’ll have to be opportunistic based on the types of companies and positions that come available. This summer confirmed that I enjoy working with social entrepreneurs and both impact investing and early-stage social enterprise will allow me to do so, albeit in slightly different capacities. Another lesson that this summer cemented was the importance of people. I found myself continually impressed with DRK’s team (all of whom were extremely smart, humble, and supportive) and the entrepreneurs they support. As I gear up for full-time recruiting, I’m going to focus less on for-profit vs. nonprofit and more on the nature of the opportunity and the team I’ll be working alongside.
I’d like to extend a huge thank you to HSIF and everyone who contributed to the fund for making this summer possible!
