Venture philanthropy is a type of impact investment that takes concepts and techniques from venture capital finance and business management and applies them to achieving philanthropic goals. The term was first used in 1969 by John D. Rockefeller III to describe an imaginative and risk-taking approach to philanthropy that may be undertaken by charitable organizations.
19-588: Started in 2002, Draper Richards Kaplan Foundation (DRK Foundation) is a global venture philanthropy firm supporting social enterprises. The Draper Richards Kaplan Foundation is the philanthropic arm of Draper Richards , a venture capital firm founded by William H. Draper, III and Robin Richards Donohoe in 1994. DRK Foundation was originally founded as the Draper Richards Foundation in 2002 and began by making investments in
38-460: A cycle of publicity-driven initiatives, in particular in education, that fail to address the underlying systemic issues facing society. Royalty fund A royalty fund (also known as royalty funding ) is a category of private equity fund that specializes in purchasing consistent revenue streams deriving from the payment of royalties . Royalties are a usage-based payment from one individual or entity to another individual or entity, giving
57-521: A form of investment fund . A royalty fund raises capital in order to purchase the right to a royalty of a product or service. However, unlike many other corporate entities, the profits derived from royalties are not taxed on a corporate level, but are distributed to shareholders in the form of a dividend , which is taxed on the personal income level. By doing so it avoids double taxation , enabling higher returns on dividends, thus making royalty funds an attractive investment. Royalty funds are structured in
76-447: A high price in order to pay for the research to create it as well as its other programs, which include a drug candidate that could treat many more people with CF. It also pointed out the strong efficacy of the drug, and laid out the costs of managing CF that would be saved for people that the drug could treat; those costs include repeated hospitalizations and lung transplants. Nonetheless the high price led to sharp criticism of Vertex and
95-444: A number of ways. A fund can purchase a royalty or a percentage of a royalty from researchers at a university or a corporate entity for examples a biotech firm, therefore exchanging capital for ownership of the royalty. Alternatively, the fund can act as a private equity vehicle, extending debt or making loans, in exchange for a proportion of the royalty or securing other assets from the institution as collateral. Investments may go to fund
114-414: A recombinant enzyme that could treat pancreatic disease in people with cystic fibrosis. When Altus reported to CFF that it did not have funds to continue developing the drug, CFF seized control of the asset and eventually licensed it to Alnara Pharmaceuticals, which developed the drug further and was acquired by Eli Lilly in 2010. UW-Madison Professor Emeritus Kenneth Zeichner wrote a paper criticizing
133-422: A research project or cover costs of a research project. Royalty funds invest in a range of business areas, including, mining , commodities , energy , entertainment , franchise , patents and IP , pharmaceuticals , and other trademark royalties. An example would be a company making an investment into a pharmaceutical company through the acquisition of a healthcare product or service royalty. The operation of
152-481: A small California biotechnology firm to help fund the discovery and development of the drug that twenty years later (January 2012) was approved as Kalydeco . Unlike other drugs that were available that just address symptoms of CF, the drug candidate was intended to address the underlying cause of CF. The company in which CFF invested was Aurora Biosciences ; CFF provided $ 30 million for Aurora to identify and develop up to three drug candidates. The unusual nature of
171-683: The United States and India . In 2010, Robert Steven Kaplan joined the Foundation and it changed its name to the Draper Richards Kaplan Foundation. Since beginning this work in 2002, DRK has invested in more than 245 organizations. Organizations funded include Peepul India in 2020, Watsi in 2013, Kiva in 2007, Living Goods in 2007, and Room to Read in 2002. Venture philanthropy For example, in 2000 The Chicago Public Education Fund became
190-776: The Asian Venture Philanthropy Network (AVPN), Social Ventures Australia (SVA) in Australia, the danone communities, and the European Venture Philanthropy Association (EVPA). In the late 1990s the Bethesda-based Cystic Fibrosis Foundation (CFF), wanting to take more direct action toward finding treatments for cystic fibrosis (CF) beyond its traditional approach of funding basic research at universities, invested in
209-526: The CFF. Twenty-nine physicians and scientists working with people with cystic fibrosis wrote to the CEO of Vertex Pharmaceuticals to plead for lower prices. CFF made the investment in exchange for a promise of royalties paid on sales of any drug it funded that made it to market; in 2014 it sold the future royalty stream to Royalty Pharma, a royalty fund investment company, for $ 3.3 billion, and said that it would use
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#1732793610930228-449: The US who was uninsured or whose insurance would not cover it. It justified the price—one of the highest in the world for any drug—by explaining that on the one hand, that it can only treat about 4% of CF patients, or about 3,000 people worldwide; as it was only approved for adults and children six and older, there are only about 2,400 people eligible to receive it; with that few people, it needed
247-481: The arrangement was widely noted. In 2001, Aurora was acquired by Vertex Pharmaceuticals , but CFF continued to fund development of the CF drug candidates. That funding eventually grew to $ 150 million, much of which was raised for the CFF by Joe O’Donnell, a Boston businessman whose son died of CF. When Vertex started selling Kalydeco, it priced it at about $ 300,000 a year and promised to provide it free to anyone in
266-416: The funds to invest yet more in research and clinical trials for cystic fibrosis treatments. In the course of working out the deal with Aurora in 2000, CFF included a clause in the agreement that allowed them to take control of the intellectual property if Aurora stopped developing any drug that had been discovered. CFF struck a similar agreement with the company, Altus Pharmaceuticals, to fund development of
285-619: The only venture philanthropy in the United States focused on a single urban school district, which served as a catalyst and strategic investment partner for Mayor Richard M. Daley and four Chicago Public Schools (CPS) administrations. Other examples of this type of venture philanthropy are New Profit Inc. , the Robin Hood Foundation , Tipping Point Community , Cure Alzheimer's Fund , The Redstone Acceleration & Innovation Network (TRAIN) initiative from FasterCures ,
304-407: The pharmaceutical company continues, as usual, manufacturing and distribution of the products or services. But once the product has been sold a proportion of the profits will go to the fund that purchased the royalty (the amount or percentage will vary between companies based on the acquisition/investment terms). Another example would be the purchase of royalties in the oil and gas industry , where
323-574: The right to use an asset , product, service or idea. One growing subset of this category is the healthcare royalty fund, in which a private equity fund manager purchases a royalty stream paid by a pharmaceutical company to a patent holder. The patent holder can be another company, an individual inventor, or some sort of institution, such as a research university. Royalty funds are a specific type of income trust , used for special-purpose finance, created to hold investments or cash flow in operating companies. These funds are not stocks or bonds but
342-415: The rights oil wells, oil mines or oil fields are owned by a royalty fund or also known as royalty trust . Other companies perform the operational aspect of extracting the minerals, paying a “royalty” in order to extract them. Intangible asset finance deals with the financing of intangible assets such as patents, trademarks, intellectual property, reputations, etc. In 2003, the intangible assets economy of
361-624: The role of the NewSchools Venture Fund in bringing deregulation and market -based practices into schools in the US . Lois Weiner writing in Jacobin criticized teachers' unions for taking money from the Gates Foundation . Others have argued that venture philanthropy often suffers from a lack of accountability, with projects prioritized more for their measurable metrics than for genuine long-term change, leading to
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