Venture
Philanthropy
Guide.org

Natasha van Bentum, CFRE

• Introduction
  
  
• What
  
  
• Why
  
  
• VP Organizations
          &
  
• Social Entrepreneurs
  
  
• Gift Planning
  
  
• Articles
  
  
• Other Resources
  
  
• Contact Us

Why venture philanthropy?

"It is ironic that in a time of unprecedented prosperity and wealth creation, there is still chronic poverty and significant income inequality. The already large gap between rich and poor has widened even more dramatically. However there is a convergence of broader forces at work that have set the stage for a fundamentally different approach to philanthropy, one that learns from the past while drawing upon the best practices of today and the New Economy: venture philanthropy." -- Venture Philanthropy Partners

Sociologist Paul Schervish, Director of the Social Welfare Research Institute at Boston College is best noted for his report "Millionaires and the Millennium: New Estimates of the Forthcoming Wealth Transfer and the Prospects for a Golden Age of Philanthropy" which estimates the wealth transfer over the next half century to be between $41 trillion and $136 trillion."

His paper, written with John J. Havens, "The New Physics of Philanthropy: The Supply-Side Vectors of Charitable Giving" (available in PDF format: part 1, part 2) provides insight into the zeitgeist of new philanthropy.

Weakness of Traditional Foundations

• Venture philanthropy advocates say most traditional foundations are too program and project driven and that they wrongly view the long-term needs of their grantees as extraneous overhead.

• Foundations, they say, don't do enough to help charities recruit and train qualified staff members, improve their computer and accounting systems, or develop sophisticated tools to track the results of social service programs.

• As a result, critics of traditional philanthropy say many nonprofit groups that rely on foundation money - even organizations with good leaders, worthy missions, and vast potential - are chronically undercapitalized and often struggle to survive.

• Proponents of venture philanthropy also content that typical foundation grants are too short-term to help struggling charities get on a sound footing.

• They say social impacts are not being realized using traditional methods.

Stereotypes held by members of both Business and Nonprofit worlds

"Business groups often assume the nonprofit sector is dysfunctional, but that's not true. There are good executives and managers in the nonprofit sector. They lack support. Conversely, the nonprofit assumes the business guy is going to come in and just apply all the business rules and therefore break their mission, break their spirit, and break their soul. And that's not true either."

"Many nonprofits struggle with insufficient resources. Nonprofits are chronically undercapitalized. They have been compassionate and committed service providers but inattentive institution builders, focusing most of their energies and resources externally rather than building and supporting their own capacity." Morino

Traditional funders tend to tie donations to programs that directly impact 'clients', leaving it to the nonprofits to find money to keep the lights on. But operational effectiveness is as important to the venture philanthropist as an innovative program." Peter Delevett, Bizjournals.com, "Venture Philanthropists Hope to Tap New Wealth"

In their comprehensive report "Assessing Venture Philanthropy," written by three former students in the Harvard Business School course on social entrepreneurship. authors Christopher Capers, Michael Collins and Shahna Gooneratne write:

"Although today venture philanthropy is currently a small share of all giving, it is a significant trend. There are three reasons why venture philanthropy has the potential to significantly change today's nonprofit world:

• there is a generation of young self-made wealthy that dislike traditional philanthropy. . . .
• primary sources of operating funding are evaporating. . . . . Government's role is reduced, resources of the United Way are declining in many areas. . . .
• there is an emerging hybrid sector "nonprofit for-profit organizations" that run as revenue-generating businesses which pursue a social mission."

The Edna McConnell Clark Foundation say success in using venture philanthropy would result in at least four conditions:

1. A marked increased in the output and productivity of the field as a whole and of several significant institutions in it.
2. Some organizations in the field, either intermediaries or significant front-line organizations achieve the status of bell-weathers or 'great institutions', whose activities lead and publicly represent the field.
3. More revenue-generating capacity - and probably more revenue - in the field as a whole.
4. Significantly better means of measuring quality, production and outcomes.

"A sea change in philanthropic giving, an unprecedented wealth creation of the New Economy and an Internet-enabled transformation in organizational effectiveness are converging to create an extraordinary opportunity to work in new and different ways to meet society's most vexing and long-standing social problems." -- Venture Philanthropy Partners

The article by Diane Gingold in FORTUNE, May 2000 "New Frontiers in Philanthropy" details the workings of venture philanthropy. Diane says,

"In the past, the majority of philanthropists relied on established organizations to identify problems and deliver solutions, but now the Internet is allowing the public to renegotiate its relationship to the social sector.

"Today individuals who wish to be personally involved in social change can turn to the Internet for a communications link and virtual global arena where they can convene with similar individuals or groups seeking to impact specific social problems without the assistance of an intermediary organization."

Harvard Business School professor James Austin has written a new book "The Collaborative Challenge" (Jossey-Bass). In it he quotes John Whitehead, former chairman of Goldman Sachs, who says: "Don't think this is some kind of charitable thing where you will be rewarded in heaven. You get rewarded right away because you'll be known as a company that is conscious of its social responsibility; you'll attract better quality employees; your stock will sell at a higher multiple; and all sorts of good things will come out of it."