Spend just five minutes speaking with someone at the Alberta Cancer Foundation, and you might find yourself engaged in a conversation about opportunity development, due diligence, value-added activities, portfolio management, and risk-return ratios.
Whaaaaaat??? Is the Alberta Cancer Foundation a charity or an investment firm? Well, the short answer is – both! While we do not make any sort of monetary return on our investments, we do apply basic investment principles designed to maximize a patient-focused return on the generous donations we receive. How do we do this? Well, it’s complicated! But it all starts with selecting the right investments. To do this, we engage in the age old process of due diligence, which can be defined as the care any reasonable person would take to confirm all material facts prior to entering into an agreement.
Conducting due diligence requires one to consider a wide array of factors that would contribute to a prospective investments success. While having a traditional peer-review to ensure scientific rigor and merit is important (we still do this), it is not nearly enough. Before committing to an investment, you need to understand the potential impact on patients, the expertise and experience of your investee, the implementation-to-patients plan, and risks/barriers. I know what you’re thinking – that’s a lot of work. Yes, it is – for both the investor and the investee!
As the investor, the challenge is to keep the process as streamlined and transparent as possible while still developing a thorough understanding of the investment. More often than not, the due diligence process is criticized as being onerous by our prospective investees, but the overarching value for all stakeholders involved should not be marginalized. What is that value? I like to call it “reciprocal confidence”.
Reciprocal confidence occurs when both entities, the investor and investee, are wholly confident (not a whisker of doubt) that each entity is fully committed and can contribute to the success of the investment. Don’t get me wrong, this is different than being confident that the investment will be successful – that’s another story! For the investor, gaining confidence about a prospective investment is relatively straightforward – investors have been doing this for centuries. The challenge is instilling confidence in the investee that the Foundation is more than just a financial instrument – we are a partner. We have capabilities, strengths, and weaknesses. But we are a partner. We aren’t looking to build barriers, but rather we can help you break them. We aren’t looking to point at all the risks, but rather we can help you mitigate them. We aren’t looking to cut and run at the first sign of failure, but rather we can help you find alternative strategies.
To me, the surface definition of due diligence is too simplistic. Yes, it is an opportunity to confirm facts, but just as important, it’s an opportunity to lay the groundwork for a stronger investor-investee relationship. A relationship of reciprocal confidence. Once we have that, then we’ll have a deal.
There is much literature published on the fundamentals and best practice of due diligence, and I would recommend checking out a recent publication by the Grantmakers for Effective Organizations if you’re interested in learning more.
~By Raja Mita, Guest Blogger & Alberta Cancer Foundation Director- Program Investment