CEO Jeff Ochs of the Venn Foundation gained experience in investments as a small-company entrepreneur and a nonprofit manager.
He formed Venn, a recent Minnesota Cup entrepreneurial award winner, in 2016 with Rob Scarlett and Jeanne Voigt to help foundations and philanthropic investors make more program-related investments, or PRIs. They are a tool for making low-return investments, instead of just traditional grants, in nonprofits, community-government ventures or small businesses.
Ochs, who holds master's degrees in business and public affairs from the University of Minnesota, has run an angel-investor network, the University of Minnesota’s Discover Capital program. He also invented Snake Oil, an educational party game that was licensed by Hasbro.
Q: What is the purpose of Venn Foundation?
A: Venn Foundation is a nonprofit public charity on a mission to unleash the full power of a special but underused philanthropic tool called program-related investments. Our vision is to create a new type of flexible, below-market capital that can be directed creatively to projects and organizations across all sectors that are helping advance charitable goals. Our name comes from Venn diagrams, which show intersection. Today we essentially have two traditional types of capital: charitable donations, which we just give away with no financial return, and for-profit investments, which we use to make money. Venn is introducing a new category of capital called “charitable investments.”
Q: What exactly are PRIs?
A: PRIs are investments that charitable entities like private foundations make primarily to advance their exempt purpose and not really to make money. As long as the investment is advancing the organization’s charitable mission and is made on below-market financial terms, the possibilities for PRIs are basically endless. PRIs can be made to any type of recipient entity, such as nonprofit, business, government, and structured as loan or equity.
Q: Are PRIs new?
A: No. PRIs have existed since 1969, and they have long been used by major national private foundations. In Minnesota, Otto Bremer Trust, Northwest Area Foundation, the McKnight Foundation, and Pohlad Family Foundation are leaders. PRIs have been used to launch the microfinance movement, advance research for orphan drugs, and spur economic development.
Q: How are PRIs “underused?”
A: In an average year, only 11 of the state’s 1,600 private foundations make PRIs. And for every $1,000 in charitable grants made during that period, private foundations and corporate grantmakers deploy just $7 in PRIs.
Q: Why should PRIs be more popular?
A: We call PRIs the “Starship Enterprise” of capital because they can go where no other capital has gone before. PRIs can do things that traditional for-profit investors would not normally consider … where returns are too low, risks are too high, or illiquidity too long. Because PRIs can challenge existing assumptions, they can succeed where our current capital markets fail. There is near-infinite demand for below-market capital. Any nonprofit with a mortgage or line of credit would benefit from lower interest rates or longer repayments. Affordable housing providers would love zero percent, 15-year loans. But PRIs are not just for nonprofits. Early-stage businesses that cannot attract traditional angel investment and entrepreneurs who do not have collateral to secure bank loans are starving for other options.
Q: How will Venn mainstream PRIs?
A: Venn is making it both possible and easy for any type of donor, not just foundations, to make PRIs with their tax-advantaged, charitable donations. Any individual or entity can create a special donor-advised fund with Venn Foundation called a “Venn Account” and then recommend that Venn use their donations to make PRIs. Venn can combine money from any number of Venn Accounts into any one PRI. Financial returns from PRIs go back to participating accounts for donors to recommend redeployment into new PRIs or as grants to nonprofits.
Q: I understand Venn has made its first PRI.
A: Venn recently made a $77,500 low-interest, unsecured loan to Binary Bridge, which is a local startup building an electronic medical record system for humanitarian medical missions and rural clinics in developing countries. Three private foundations, one business, and five individuals funded this loan with tax-advantaged donations or grants to their Venn Accounts. Any financial returns from the PRI will go back into their accounts for reuse.
Q: Who supports Venn Foundation?
A: To date, Venn has received operating grants from Bush Foundation, 3M Foundation, and Jeanne M. Voigt Foundation. Venn also received $30,000 in prize money as the 2017 MN Cup [startup competition] impact division winner. Venn has about $370,000 in 12 Venn Accounts.