A Private Equity Approach to Charity

A man working at hardware store

The tenants of private equity can help organizations like REDF assist community members looking for jobs.
Image: Shutterstock

What’s the difference between a private equity firm and a charity? Obviously one is focused on generating income, the other on giving back to the community. But in terms of operations, there are a surprisingly large number of ways charities can learn from the way equity businesses are run.

For example, private equity firm KKR is the power behind the Roberts Enterprise Development Fund, or REDF. Cousins Henry Kravis and George R. Roberts have used their business acumen to inspire tangible results with Roberts’s REDF, which works to find jobs for individuals facing employment difficulties like addiction, homelessness, and parolee status. KKR employees regularly spend time working with REDF on various projects.

Most recently, REDF received a grant from the Social Innovation Fund, or SIF, which will match dollar for dollar REDF’s investments. The $7 million grant will be matched by $7 million in private funding. This combination of private and federal assistance will add to the 8,700 jobs already created with REDF support. The SIF investment is the largest federal investment of its kind ever seen in U.S. social enterprise.

“With the support of the Social Innovation Fund, REDF has been able to expand and conduct rigorous research on social enterprises demonstrating it as a cost-effective solution that delivers results,” said Damian Thorman, director of the SIF.

Social enterprises like the ones that REDF supports are important because they provide people with jobs in a way that is sustainable over the long haul. By thinking like a business, REDF and organizations like it are able to create job opportunities that are lasting and provide good training for everyone involved.

And the results are in. According to research performed by REDF earlier this year, workers who went through the REDF programs had higher incomes after one year than those who didn’t. Total monthly income increased by 91% from $653 to $1,246. And the stability affected other parts of workers’ lives, too: the percentage living in stable homes increased from 15% to 53%, and 2/3 of those involved in the program benefitted from support outside of the program as well.

And for the investors, the bounty was good, too: for every dollar spent, the return on investment was $2.23 for society as a whole, including tax reductions and increases in business revenue.

For REDF and the businesses and individuals it helps, reaching goals is a matter of combining a social mission and private sector experience. By taking on employment difficulties from the mindset of an investor, REDF provides proven solutions to employment difficulties, bettering the community as a whole.

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