Our investment process
Our detailed and standardized investment approach ensures thorough knowledge of our organizations as well as their management. Regular interaction with the organizations allows us to monitor whether they are achieving their long-term objectives.
1+2: Sourcing and screening organizations
Our local investment managers identify potentially attractive organizations across the region. This primarily takes place through strong local networks with which LGT Venture Philanthropy has worked closely for years. After an initial information-gathering process, an organization is evaluated against five main screening criteria: quality and experience of management, effectiveness of the solution, growth potential, efficiency of implementation and potential to create impact. Each potential deal is then discussed in the global team where the decision is made whether to proceed with further analysis.
3+4: Due diligence and implementation
Comprehensive and thorough understanding of the organizations is critically important to us. We examine, among other things: the business model and potential to create impact, the business strategies, future plans and financing, skills of the management and team, the relevant market, and the competition. After this phase, we confer once again whether the organization and the proposed deal meet our criteria and is worthwhile pursuing to decide whether to continue with the analysis.
When a positive decision is reached, a deeper analysis phase begins where we go much deeper into the most important aspects. The objective of this phase is to finalize the deal terms, estimate the risks of potential financial involvement and consider whether the organization can make a significant positive impact in the future.
5: Portfolio controlling und reporting
A year-end or final report at the end of our involvement is insufficient for us. We have to be continuously informed about what is being achieved and about possible problems that might arise in the short-term. For this reason, structured, monthly reporting is standard practice. The key performance indicators of the impact and progress of the organization which are defined during the due diligence process — for example the number of trained youths, the number of households receiving renewable energy, or the number of newly-founded small businesses — are the foundation for such reporting. This data, along with regular ongoing communication, allows us to monitor whether the organization is reaching its long-term objectives. Only regular, trusting exchange makes it possible to provide timely corrective and supportive intervention.
This intensive, permanent monitoring, in our experience, adds a lot of value, and is made possible because our local team members work, on average, one half day per week with each portfolio organization.
6: Duration of support
The amount, type and duration of the financial involvement is determined with the organization as early as possible. Most change and growth processes require time. Therefore a five- to seven-year involvement is typical for venture philanthropists. Success, and the positive social impact it gives rise to, requires a mutual relationship of trust, a long-term perspective, as well as taking responsibility for the positive continuing development of the organization.
If you would like to know more about our apporach or would like to see sample documents, please contact us.