‘One Giant Leap for Philanthropy’

In this podcast with Bain and Company’s Hugh MacArthur, our CEO Dana Bezerra and board member Graham Elton discuss Greater Share’s approach to philanthropic funding and how we’ve already garnered support from some of the world’s leading private equity general partners.

Transcript:

Dana Bezzera: The founders of Greater Share really are trying to marry the longtime horizon, wealth creation effects, and investment acumen of private equity with the provision of long-term unrestricted funding for the NGOs. And for those who've been around philanthropy, that is the Holy Grail.

Hugh MacArthur: That's Dana Bezzera, the chief executive officer of Greater Share, a philanthropic organization that connects top performing private equity managers to high impact NGOs.

Graham Elton: We've been very, very fortunate to get the likes of Bain Capital, and Advent, and Hg, and Nautic, Permira, Lexington, Cinven. I mean these are top, top GPs.

Hugh MacArthur: And that's Graham Elton, chairman of Bain's EMEA Private Equity Practice. He's also a founder and chair of the investment committee at Greater Share. Today on Dry Powder. I'll ask Graham and Dana to share the origin story of this intriguing philanthropic venture and how they're forging a new approach to charitable giving, modeled after a private equity fund of funds, which will be very familiar to most of our audience. But, as Graham Elton says, it could be completely transformational to how NGOs are funded in the future.

Graham Elton: We've got an industry and a community here that thinks long-term, that thinks about results, and doing that collectively, I think, is something that all participants are finding particularly rewarding.

Hugh MacArthur: I'm Hugh MacArthur, chairman of Bain's Global Private Equity Practice, and this is Dry Powder. Graham, you've been with Greater Share since its inception. What the heck is it for our audience? And then how did the idea come about?

Graham Elton: As you'll probably remember, it was a visit made to the Bain offices by a couple of board members from Teach for All, which is the parent organization of Teach for America. And they had this question around long-term unrestricted funding for Teach for All. And Paul Fletcher, who's now the chair of Greater Share thought there might be something that private equity could do to help solve this problem. And they gave that as a bit of an exam question to Bain. Actually, a Bain Brussels team worked on coming up with this construct. And this construct is actually quite simple. It's a construct which says that investors are going to get to invest in a fund of funds and that fund of funds will be made up, the very best GPs in the world. When I say best GPs, as you know, we've been very, very fortunate to get the likes of Bain Capital, and Advent, and Hg, and Nautic, Permira, Lexington, Cinven.

These are top top GPs with long track records of fantastic returns and the investor will split their returns 50/50 between themselves and some carefully selected NGOs. And the GPs themselves will donate all of the fees and carry that they would've earned from the fund of funds investment in them. So each party, the GPs and the investors see their donations if you like, being doubled up by the other parties. So there's a real multiplier effect which everyone involved with private equity clearly enjoys very much.

Hugh MacArthur: So, as I understand it, Graham, what you're saying is there are a group of high-net-worth individuals that can invest in very talented GPs or private equity funds. Those private equity funds then generate an attractive return and the individual investor can elect to donate anything above 50 percent or above of that return to Greater Share. And Greater Share in turn helps select the very best educational NGOs in the world and distributes those returns to those charities. And those returns are actually multiplied, if you will, because the GP are donating their economics from this investing as well as the individual investor contribution to the party. Is that right?

Graham Elton: You've got it spot on. And that great group of education NGOs was selected by an education committee run by Liesbet Steer who ran the education commission in Washington DC and a global group of education experts. And I'm sure Dana can tell us a bit more about those NGOs and what our strategy is within Greater Share for the education space.

Hugh MacArthur: Dana, one of the things that I didn't understand when I got involved with Greater Share is that an NGO typically has line of sight to funding only in the very near term because it tends to be an annual process. And the fact that this is a long-term proposition with private equity being a long-term asset class and the fact that monies will start to come in year say, three, four or five, that's actually something the NGOs value tremendously. Could you chat a little bit more about that and explain it to the audience?

Dana Bezzera: Yeah, absolutely. So NGOs typically receive funding on an annual funding cycle, if they're lucky, a funder may commit to two years of funding. It's quite extraordinary for an NGO to have line of sight or visibility into multiple years. And so as a result, the funding is episodic and it's highly restricted typically, meaning funders often look at what an NGO has done in the past. They focus on what they think they're really good at or what the funder wants them to do, and then funds them with a very discreet style of funding that is only usable by those specific activities.

So not only do they not have line of sight into their revenues, generally their revenues are highly bespoke and designated in advance for particular programs. And what's particularly notable about that is if you contrast that with business who are always taking in market signals and responding immediately and dynamically, NGOs have to go raise the money every time they receive market signals that they need to be doing something different because they're only funded to do what they've always done.

So as a result, innovation, growth, responsiveness to market, all of that is deeply hampered and is a really ineffective way to fund NGOs. So this type of funding that is unrestricted really is very akin to equity in business. When they have capital that will come in over a period of time that is unrestricted, it really does give them the opportunity to sort of lift their gaze as one of our executives told us, and to ask different questions around what have we learned, what do we believe needs to happen, and of our own volition, how do we move into that future? It's really shortsighted, I think, to provide restricted funding that hampers the great wisdom inside these organizations that are on the front lines with children and learners every day.

Hugh MacArthur: Dana, why did you decide to focus on the education space versus any other sector of NGOs?

Dana Bezzera: Sure. It's pretty indisputable that globally there are glaring gaps in the rate at which children from different economic backgrounds gain access to education. Yet our education systems globally have largely remained pretty stagnant. So Greater Shares core partners are addressing these gaps. Importantly, there are two innovations that we think matter. One is that our NGO partners are really expanding the definition of an educator. So instead of thinking as a teacher, as the only educator that exists in a child life, all of our NGO partners think of the other adults that surround a child, whether that's a community leader, or a counselor, or a food bank, or other types of supports. They try to really have an inclusive definition of who constitutes an educator. The other innovation most of our partners are working with is innovating from this one size fits all bilateral view of education. A teacher teaches to a learner. Most of our partners are really working at a child or learner-centric model where they place the learner at the center of what's needed, whether that supports outside school or supports for the extended family, how can they use these models to innovate?

Hugh MacArthur: I love this notion of evolving the bilateral model. And I was looking at this photograph happenstantially in a history magazine a couple of months ago, and it was back to William Shakespeare's time at his hometown of Stratford-upon-Avon, and it was a photograph of a school classroom and there was a teacher's desk and then there were a whole bunch of chairs around the classroom. So for 500 years at least, this bilateral model has existed and with a very little lack of innovation, or new traditions, or figuring out what in the modern world should we be teaching people and how should we be teaching it? So I think it's tremendous that the innovation that these different NGOs are bringing to the educational world as well as just getting the basics down is really exciting to create something that's totally new. And Graham, can you give us a concrete example of exactly how that capital is being put to work?

Graham Elton: To give you an example of close to us here in London, one is the West London Zone, and they work as it sounds like in West London, but their model works anywhere and they would love to be able to roll it out into other areas of need within this country, but they've never had the long-term funding that would enable them to plan that far ahead and to make those sorts of commitments, Greater Share funding will enable them to do that.

Dana Bezzera: What they have never had access to is growth capital. This type of funding allows them to again, lift their gaze and actually look at acquisition of additional sites, because they have the capital to compete, to acquire, to retrofit, and to open new sites even before funding started flowing. And that just has created a rapidity in their flywheel that they hadn't contemplated in the previous years of their existence.

Hugh MacArthur: Now Dana, we talked a lot about West London, but I think our audience would be interested to know that this really is global. Would you like to just go through some of the different charities that are being supported by Greater Share?

Dana Bezzera: You're absolutely right. It was very important to the Greater Share models to have at least four in the global North and four in the global south. So as was already mentioned, we have West London Zone, we have LEYF which focuses on nurseries, and you have Kaivalya in India, CAMFED covering Africa and various other parts of the world, aeioTU in Central and South America. The NISS, which focuses on post-secondary education, predominantly though definitely not exclusively in the US, KIPP and Teach for All. So truly a broad range from early learner to post-secondary.

What's interesting also is that this trouble around funding is shared. Our NGOs deeply value innovation that can be captured on the ground close and proximate to the learner, and they struggle to share that up, if you will, to systems, to policy to try and generate additional change. And I think that's also something we'll see emerging from the model, given the unrestricted funding is a desire for our group to try and work everywhere from practice to policy.

Hugh MacArthur: Now, Graham, you certainly don't need to teach this audience anything about private equity and how the model works, but what in your mind about the private equity model, we talked a little bit about longer duration, but what else and what kind of a difference does it make for the world of educational giving?

Graham Elton: I think what we've got here is a model that enables people within the private equity arena to do something as a community. And the community that we're building within Greater Share is a lot more than just moving money around. So I haven't mentioned yet Jason Glover, who's one of our fellow founders. After we came up with the model, the most important thing was to make sure that it works for legal and tax purposes. So Jason Glover, who runs Simpson Thatcher's private equity practice and the operations here in London was the man to go to. And he's been fundamental with much of what's happened since then.

And then we had needed also an organization that could really help with the running of reasonably complex fund administration. And Apex came on board and have been a fabulous partner. It's all pro bono. No one's taking money out of this. So we've got an industry and a community here that thinks long-term that thinks about results. And doing that collectively I think is something that all participants are finding particularly rewarding.

Hugh MacArthur: I'm interested in your vision for the community of GPs and NGOs as they come together and how they interact with one another going forward.

Dana Bezzera: No surprise, when our NGOs start planning for this type of capital, it often tweaks their strategy. So one of the things we're doing is building the opportunity for our investors, inclusive of our GP partners, to quest into the field, to spend time with the NGOs to really observe and understand what is their operating context, what are their infield market challenges. There will likely be learnings that are able to be cross-pollinated between the two. And I think one of the important points about Greater Share, a real innovation in the space is coming from 20 years in private philanthropy, Greater Share is a lot like foundation in a box. The foundation I came from, we had 10 or 12 people working on our programmatic practice, 24/7. Greater Share has built out an equally expert education committee looking at things like efficacy of interventions, the capacity to absorb capital.

It really is the thing of beauty to watch our investment committee in action. And in the Greater Share model, you have all of the investment rigor built in. Every time you're taking in a gain, you are sharing that gain with society or the greater good. And more important than that perhaps is that that portion you're sharing is grossed up, if you will, by the pass through economics of our GP partners who send all of their economics into the philanthropic pool as well, creating a much larger pool for the social good even than frankly the individual investor return.

Hugh MacArthur: Graham.

Graham Elton: And I think this fundamental model, which is a sort of win-win-win. It's a win for the GPs, it's a win for the NGOs, and it's a win for the investors. The message for the NGOs is clearly the easiest one to get across. The message for the GPs is relatively straightforward, but for an investor it's a more complex one, because we're actually asking them to think with both sides of the variant at the same time. It is the investor mentality of getting the very best returns, but it's also the philanthropist mentality of giving something up for the betterment of the world. And that combination, the way I sometimes think about it is if you're thinking about investing a $100,000 and you're thinking about donating a $100,000. Actually put those two together and put your $200,000 into Greater Share. The returns that you'll get on your investment will be 3X and the philanthropy or a hundred thousand of philanthropy will be doubled to $200,000. We think that's a pretty compelling opportunity versus doing your two $100,000 trades.

Hugh MacArthur: Well having four children like I do, you don't need to convince me about the value of education. And unfortunately, the access to education and the access to quality education is really shockingly poor in too many areas around the world. And so I wanted to thank both of you for coming on the show today, because I think what you're doing is terrific. Obviously I'm a part of it. I have opted in, and I think it's a wonderful organization to look forward to working with both of you in the future.

Dana Bezzera: Thank you.

Graham Elton: Pleasure, thanks Hugh.

Hugh MacArthur: I'm Hugh MacArthur. Thank you for listening.