Dragons’ den? New investment vehicle targets associations

Association leaders might balk at the idea of ‘pitching’ for private investment, but a new vehicle designed to encourage innovation and growth could see them doing just that.

The Association Investment Partnership (AIP) is the brainchild of five industry veterans who believe associations can thrive by adopting a more business-minded approach.

The group says it has investors (a mixture of individuals and Family Offices) waiting to pour money into associations, trade or professional, who can show convincing plans for growth.

This will involve associations transferring assets (an education programme, events, publishing division etc) into a For Profit division and allowing investors to take a stake in them.

That might give volunteer boards the jitters. But AIP co-founder Robin Lokerman, Group President at MCI Group, said the aim was to ensure associations kept control of their products.

“We don’t want associations to lose their assets,” he said. “So, our investors will take a minority stake, say around 20 per cent, maybe increasing to 30 or 40 per cent, and then associations will be able to exercise an option to buy them out after the first five years.”

He added: “We want to see growth on the investment but also some impact on the industry or profession the association represents, whether that’s increasing education or driving standards or providing marketplaces. We want to stimulate that and provide some additional funding to help associations operate in a digital world, which is as different today as it was two or three years ago.”

The other partners are Alessandro Cortese, Kai Troll, Velma Hart and Galen Poss.

Cortese, CEO of the European Society for Radiotherapy and Oncology, said it was important to ‘build confidence’ amongst associations who might find the concept ‘difficult to understand’.

Although this kind of investment is common amongst other types of not-for-profit organisations, such as universities and business schools, it has not taken off in the association sector.

“I think that by having the right profile and visibility in the industry and by building case-studies around successful projects then, progressively, minds will start shifting. But there is no rational resistance to a model like this – there is no reason why an association should not work on a growth perspective like many other types of organization. If you can strike a balance between this and the community-centric, purpose-driven aspect of associations, then there is no incompatibility.”

The fledgling partnership says it hopes to place around €30m in funding over the next 18 months and aims to get around five individual projects off the ground by the end of the year.

While AIP works on behalf of the investors, taking a share of their investment, it also works alongside the associations to design new business models and provide financial advice.

AIP has identified various potential areas for growth – events, membership, mergers and acquisitions, education, and community etc – but recognises the biggest challenge may be cultural.

Troll, founder of ASSOCIATIONWORLD and Development Director at the International Sport and Culture Association, said: “This kind of investment is about providing associations with security and an opportunity for them to bring in external expertise. It’s a co-creation process and at board level the devil will be in the detail, but we need to demonstrate that those details can be worked out. I can imagine the boards of well capitalised associations saying, ‘why do we need this?’ While the executive office is saying, ‘This is a great idea!’. So, one of our tasks will be overcoming the reticence of boards and helping them realise what this funding can become and the innovation it can bring.”

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