Impact Investing

Investment Criteria

Clear social objectives: companies need to make a product or deliver a service that can benefit the Bottom of Pyramid or address an environmental issue.

Measurable social impact: the impact on social or environmental issue can be clearly measured against the company’s social objectives.

Scalable and self-sustainable business model: a clear business model with financial sustainability within our investment holding period, and high replicability to realize scale-up potential.

Investment Approach

Our typical investments range from RMB500,000 to RMB5,000,000 in debt or equity with a payback or exit in roughly five to seven years.
- Debt: we provide debt investments to social enterprises, typically at below market rates.
- Equity: we usually take minority stakes below 30% in social enterprises, and play a management role through a position on the board of directors.

We also provide advisory services to our portfolio companies to uplift their management skills.

Yu VP

Our vision is that in many cases philanthropy fund can be leveraged therefore producing a bigger social impact, and social ventures can achieve a deeper impact than NGOs.
Our mission is to help Chinese high-potential social enterprises scale up with both angle funding and hands-on consultancy.

Yu VP History

In July 2011, Venture Avenue and 3 board directors contributed RMB2.5M to started Yu VP – one of the first local venture philanthropy management entities out of mainland China.
In March 2012, Xinhu Group, Amity Foundation and Yu VP jointly formed Xinhu – Yu Venture Philanthropy Fund. The initial fund size is RMB10M, and the fund is managed by Yu VP.
In March 2012, Mr. Xu Yongguang started heading the Strategy Committee of the Fund to better govern its social mission.

Three Meanings of “YU”

“郁” - To memorize our best friend Wen Yu.
- Left us in Oct’09, with unfinished journey on venture philanthropy.
- Tsinghua ‘97; Harvard Business School’ 04; McKinsey ’05.
“渔” - better to teach how to fish, than to give fish: 授人鱼,不如授人渔.
“育” - to incubate social ventures, with needed angel funding and management support .

Why venture philanthropy

What is social enterprise

Same as traditional NGOs, Social Enterprises (SEs) have the mission to service the Bottom of Pyramid sector with better. employment or better product. But what makes SEs different is their viable business-operating model to manage their service, product and resources, therefore making them more self-sustainable and impactful.

What is venture philanthropy

Venture Philanthropy (VP) is the use of capital and human resources in charities to either build the capacity of a non-profit organization or to invest in a social enterprise. Forms of investment include equity, loans and convertibles.

VP involves a high engagement over many years. Donors and/or investors make long-term funding commitments, closely monitor performance objectives through pre-defined measurement tools, and problem-solve jointly with the leadership team on a regular basis.

Why venture philanthropy

We believe that social enterprises, with market-oriented approach, have huge growth potential and will be a big part of the solution to social and environmental problems.

Venture philanthropy fund coupled with customized, hands-on consultancy will ensure SE’s growth momentum and catalyze the change in social sector.

VP in China

Proliferation of Social Enterprises in China in the past decade

“Social enterprise” became a hot buzz word in China since 2006, implying the ever popular interests from the public.

Government starts to accept and appreciate SE's impact and to support: MCA included the word of “Social Enterprise” in 5-year strategic plan in 2011.

Many leading academic institutes (e.g. Tsinghua University, Beijing Normal University, etc) started to study the SE concept and case examples – will be an active catalyst for government policy change.

However, social Enterprise sector still facing challenges

Despite of the tremendous growth, the sector is still very small with ~1,000 SEs by 2011, majority of which in early stage.

A few SEs have emerged with initial success, but facing challenges in financial resources and management capabilities to scale up.

Venture philanthropy prospect

Venture philanthropy in China is gaining popularity with a number of overseas funds and high-net-worth-individuals (HNWI) setting eyes on this new philanthropy market.

Despite of limited number of completed investments, we foresee venture philanthropy has started catalyzing the change of China civil sector landscape. In many philanthropy market segments, it will play an indispensible role to help emerging social enterprises scale up.

Governance

Strategy Committee

Xu Yongguang, Qiu Zhonghui, Ye Zhengmeng.
The SC retains veto power over investment decision based on their evaluation of the investment’s social purpose.

Investment Committee

Michael Tong, Robin Zhang, Gracia Gu.
The IC is responsible for managing the overall social investments from social enterprise screening, evaluation to investment decisions.

VA Selected Investments

Golden Wings

Project Description

Golden Wings is a social enterprise in Beijing serving underprivileged children including those with autism. It uses art therapy (drawing, music, dancing, and nature learning) to improve the life quality of special children, helping them to pursue aspirations of art and realize their values to society. Golden Wings also sells the paintings created by these kids, in the form of calendars, post-cards and other printings. A significant portion of the sales revenue is given back to those children’s families, or to support “Golden Wings trainers” to offer low-cost art trainings to more underprivileged children.

After incubating Golden Wings for a year, in September 2012, Yu Venture Philanthropy made an equity investment in Golden Wings.

Post-Investment Progress

Social Impact
- Beneficiary #: Trained 75 children with disabilities in 2013, increasing from about 30 children in 2011
- Benefit received by beneficiaries: The drawings of 32 children were converted into products; on average RMB 3,800 was given back to each author, a 250% increase compared with 2011
- Parents satisfaction rate: 95%
Financial Sustainability
- Total revenue: About RMB1.7 million in total, a 160% increase compared with 2011
- Sales revenue: About RMB 940,000, increasing from RMB370,000 in 2011

Xixiang Women’s Development Association

Project Description

Located in southern Shaanxi Province, Xi Xiang Women’s Development Association provides trainings and microfinance to underprivileged women in Xi Xiang County. Their mission is to empower local women by changing their mindset towards an independent and respectful life.

After incubating the organization for a year, at the end of 2012, Yu Venture Philanthropy made a convertible investment in Xi Xiang Women’s Development Association. The investment will be converted to equity once they establish a microfinance company.

Post-Investment Progress

Social Impact
- Beneficiary #: Total 11,280 accumulative borrowers in 2013, increasing from about 8,100 in 2011; 747 were first-time borrowers in 2013
- Female beneficiaries: 98% beneficiaries are impoverished women; 550 women received training in 2013
Financial Sustainability
- Year-end outstanding loan: RMB13 million in total in 2013, a 106% increase compared to 2011
- Revenue: About RMB 2 million, increasing from RMB 820,000 in 2011

Rice Donate

Project Description

Rice Donate is an innovative online platform, which strives to improve the transparency, convenience, and participation level of philanthropy in China. Via Rice Donate, NGOs can initiate philanthropic projects and receive funding support; Rice Donate mobile application users can use its app functions to achieve healthy lifestyle, learn about philanthropic projects and participate in project decision-making process; corporate participants can use the Rice Donate platform to choose suitable philanthropic projects to donate to.

Currently, Rice Donate has already helped 200 philanthropic projects to raise RMB 5 million worth of corporate donations. The total number of immediate beneficiaries is more than 200,000. Furthermore, Rice Donate already has more than 400,000 mobile application users, and a large number of them have already used the application to develop healthy lifestyle and participate in various philanthropic projects. Moreover, Rice Donate has provided professional CSR solutions to more than 30 corporates. Rice Donate has promoted corporate philanthropic image and the total promotion impact has reached approximately 130 million people.

Social Innovation Hub participated in the A round funding of Rice Donate as the only impact investor.

Post-Investment Progress

With the investment from Social Innovation Hub, Rice Donate aims to attract additional corporate donors and mobile application users.

Yixiu Academy

Project Description

Yixiu Academy combines various learning methods, both online and offline activities to create a career development community for professionals in philanthropy in China. Yixiu creates an online learning community, which enables professionals in philanthropy to use fragmented amount of time to learn useful professional skills in a targeted, affordable and highly efficient manner. Not only does the learning community enable individual professionals to improve their own knowledge base, Yixiu Academy also encourages knowledge sharing and exchange.

From having 100 users in August, 2015, Yixiu Academy has grown to have 10 thousand registered users, 80 lecturers, and 200 courses. Yixiu Academy has fundamentally changed the learning habits for many professionals in philanthropy. Yixiu Academy has also built a career development trajectory for specific roles in philanthropic organizations and matched such trajectory with tailor-made classes to ensure step-by-step progress in career development.

Yu Venture Fund has recently invested in Yixiu Academy as an angel investor.

Post-Investment Progress

Yu Venture Fund believes that Yixiu Academy’s product is what is needed to uplift the professional ability of the whole industry. Yu Venture Fund values the scalability of Yixiu Academy’s products and social impacts. Yu Venture Fund will provide various resources in the industry to enable more professionals in philanthropy to enjoy low-cost and high-quality professional training.