Can you explain the origins of the DOEN Foundation and the link with the charity lotteries?
The Dutch Postcode Lottery was founded in 1989 by four entrepreneurs to raise funds for charity. The lottery has the aim to support organizations with long term and institutional funding. Today, the lottery supports over a 100 charities with a yearly donation. In order to be eligible for funding (which correspond to a minimum donation of 500.000 euro), beneficiaries must have at least one million euro of their own funds. Today people are happy to participate in the lottery because they know that 50% of the lottery ticket goes to the charities.
The DOEN foundation was established by the Dutch Postcode Lottery in 1991, in order to support smaller initiatives with different financial instruments such as grants, loans and equity. The DOEN Foundation supports pioneers that use enterprising approaches to find innovative solutions for a better world.
DOEN receives all its funds (in total 30 million euro) from the Dutch Postcode Lottery and other two lotteries, which were added in time to the portfolio: the FriendsLottery and the BankGiro Lottery.
We are an independent foundation, with our own supervisory board, and we get all the money that we can spend from the lotteries. In addition we can spend some of the returns on investments and loans. We follow the themes of the charity lotteries: we work in the green area, in the social area, and in the creative area.
The DOEN Foundation supports initiatives within the following programs: Social Enterprises, New Meeting Places, Circular Economy, Sustainable Energy, Sustainable Food systems, Culture in the Netherlands, and International Culture and Media. How did you choose these fields of action?
We believe in a green, social inclusive and creative society. All our programmes are based on these thematic fields, in line with the fields of the Charity Lotteries.
In the past year we have developed our long term strategy. Based on an external analysis with relevant stakeholders in the different fields, we have decided that for the next 5 years, we aim to accelerate four transitions. These four transitions will function as our guiding principles.
First, we will support pioneers who put ‘the commons’ first, and stimulate alternative forms of collaboration.
Secondly, we want to make a transition from a linear and exhaustive economy to a circular economy: At the moment over-exploitation of the earth’s resources is causing climate change, a massive loss of biodiversity and a lack of raw materials. Radical changes are needed to counteract this.
Thirdly, we really want to create a socially inclusive society where everybody can play its role, and where nobody is left behind, such as refugees or people with different backgrounds (cultural, political, religious).
Last but not least, there should be room for more radical imagination, and there is also a link to our creative imagination. Radical imagination is the ability to depict the world not as it is, but as it could be. Without a vision on how society could function and could work, and not changing the way we currently work, we would not be able to change our society into a better working version of it.
Within these transitions, we have identified the seven specific fields of action that you mention above where we will focus on the coming years, still in the area of green, social and creative.
You provide grants but also loans and equity and you gain a great deal of experience in the world of impact investing. Which are the main benefits to go beyond the simply grant system?
We mostly provide grants. Most of our partners within the social and creative programs, such as artists or active residents do not have a business structure in place. However, if there is a business structure, we prefer to take a share in their business. Our leitmotif is: we invest where possible, and we give a grant if it’s necessary.
Our impact investments is characterized by three things:
- Impact goes before financial return
- We invest in the early phase of a startup
- We dare to take risk
We believe that the best instrument is to participate in the earlier stages of a company. As a shareholder, mission drifts can be prevented. Moreover, with extra shareholder equity, it is easier to attract other equity such as loans or bank finances: it’s the leverage effect. The dividend could in conclusion be used for other grants and loans. If a company doesn’t need us anymore, we sell our share. The proceeds are used to invest in new startups. This way our potential impact is even bigger.
We are flexible in providing different instruments for different kinds of organizations, so in some case we give grants, when the organization is in a very very early stage, but we continue having a relationship and when they grow bigger and become more solids, we can take equity. We have long relations with our partners.
For example we have a long-term relationship with a brewery in Amsterdam, De Prael. They work with people that face difficulties in the labour market. The founders were working in psychiatry and have a passion for beer, so they decided that they needed to give these people a job so that they could feel valuable again. The brewery is successful. In time, they further developed and have now two places where they brew, and a very nice and successful pub. When they started we supported them with a grant. After a few years we gave them a loan to expand their business. Over time we became shareholders of the company. In total 200 people have found a job in one of the breweries and the pub. Now De Prael is about to open a third brewery.
Which is the percentage of failures in your equity activity?
DOEN distinguishes itself from other impact investors, because we really put impact before financial return and we invest in the earlier stages of a company, when there are high risks involved. We can also participate for a longer period if necessary.
We don’t really measure the percentage of failure. It’s not in our DNA to think in terms of failure, but we focus on making impact. An initiative that we support that in the end fails, could have made impact in the time that it exists. Should we consider it failure? For example we supported a company that sold only sustainable fish. Their shops went bankrupt, but the supermarkets started to see that there is actually a sustainable fish market. Therefore, they expanded their offer of sustainable fish in the supermarket, so an impact was created.
For us the most important part is the impact, then the financial return. We are patient investors, we select projects based on the impact created, if they can really change markets, if they fit within our programs, and if they really make society more inclusive.
What is the Fund’s approach to social impact assessment? Do you evaluate the projects by your own or do you prefer an external evaluation?
Because of the diversity of DOEN, it’s difficult to say “this is what we have achieved this year”. For our complete organization, since one and a half year, we started with an impact-learning trajectory together with an organization specialized in impact reporting. We are supported by this agency, because of their huge wealth of experience. We need structure and organization, because we have a small team and we are very busy. They are helping us in this learning cycle, and we call it also an impact-learning trajectory instead of an impact measurement trajectory. I’m always very keen on words because impact is not so likely “to be measured” as such, it is more complicated than that. We want to learn because we want to improve the way we work. We have to learn about what we support, and to better communicate with our partners and the outside world. We want to use the learning to select better projects to create even more impact, and we also want to use the learning to stimulate and share it with partners, so that they benefit from it as well.
As for impact assessment, we do a combination of two things: we ask the partners to provide us with updates on certain indicators, but we also have the full field of action evaluated by external parties, both qualitative and quantitative.
Moreover, we started to make a Theory of Change for the whole of DOEN, which it is very difficult to do considering the fact that we are supporting frontrunners in different areas. We also develop Theories of Change for every program and we are currently defining all the indicators of the Theory of Change, which are both on the quantitative data and on the qualitative data.
We are now going to find mechanisms to see how we can put numbers on the quantitative signs behind projects, because it is a step-by-step approach. We also define methodologies to find the qualitative data. Next to this, we have an external evaluation on all of our programs. We just finished all the evaluations for the past five years, and we worked with multiple partners because of our extension to different fields. Moreover, we are going to change the reporting of the projects. We are changing the forms, inserting more questions on impact. It is often quantitative, and we use different mechanisms to pull out qualitative data. The next step is how to drag all the information. we have a software solution but we are trying to improve it. For example, in the culture area, we used the MSC (most significant change) technique. There you get also real stories about how you change people’s life.
We are still learning, and because we have about 600 running projects and 250 new projects every year, it is massive. We should not loose ourselves in this whole thing, and not to be too much into details. It’s about rough figures, rough data, and interpreting it in the right way. That is a challenge for us. After all, our mission is to create a green, socially inclusive and creative society. That’s what we should focus on.