What is venture philanthropy as opposed to philanthropy?
Answer:
Venture Philanthropy is the application of venture capital principles and practice in the field of philanthropy. It is an approach to philanthropy that emphasizes capacity building of organizations and the belief that grants to nonprofit groups really represent a form of investment in an entity. In the same way that one would not make a significant investment and then walk away, Venture Philanthropists look for ways to be appropriately engaged in supporting the work of the nonprofit beyond simply providing funding. Social Venture Partners provide expertise to their nonprofit investees (grantees.) See the SVP Model of supporting nonprofits here.
Is there a body of literature on Venture Philanthropy?
There are not many pieces one may refer to in order to understand the basics of this approach. A good place to start is the article "Virtuous Capital," published in the January/February 1997 issue of the Harvard Business. Another good resource is the paper was developed by the Roberts Enterprise Development Fund (REDF), "The Challenge of Change." See SVP in a Box to understand the details of the SVP Model of Venture Philanthropy. See Case Studies on SVP here.
Venture Philanthropy so controversial?
Venture Philanthropy is relatively new to the field; SVP has been practicing VP since 1997. Venture Philanthropy as a model is often presented as a critique and alternative to traditional or Classical Philanthropy. In public discussions and articles, it is often easier to make cursory critiques of each approach rather then spending the time to really dig down and understand the relative value of each. In addition, the advocates of VP have sometimes had to justify the very practice of VP in the face of opposition from those who feel any direct involvement of donors in relation to their grants is inappropriate and that nonprofits should be free to pursue their vision without what is perceived of as "interference" by funders. Furthermore, many practitioners of VP ask their investees to engage in significant documentation of the results of their work, often called social return on investment or other approaches. Some critics of VP feel that the central work of the nonprofit sector is beyond measurement and it is wrong to attempt to enable nonprofit organizations to measure and quantify the value of their work.
In point of fact, all funds moving through the nonprofit sector represent types of capital that are being applied in the creation of social value. This capital represents a Nonprofit Capital Market and as in any capital market, there is a place for many and all types of investors. In the for-profit market, some players are venture capitalists, while others are investment bankers. In the same way, the nonprofit sector needs both venture philanthropists and classical funders in order to provide nonprofits with the array and type of capital necessary for true success. At the end of the day, we need more resources and types of support if we are to have any chance of substantially addressing the significant challenges before us all. Social Venture Partners provide financial resources as well as professional expertise in a variety of areas.
"engaged grantmaking" is different from Venture Philanthropy.
Many of those involved in what has been called Venture Philanthropy are realizing that in many ways "all" they are doing is becoming more connected - more engaged - to the work of the nonprofit sector. For some funders this means being involved in monthly meetings with investees, but for others it may manifest in other forms. In some ways, Venture Philanthropy is simply a subset or smaller component of the larger movement of philanthropy toward engaged grantmaking. As we move forward over coming years, it will be interesting to see how philanthropy continues to evolve in response to the many demands of the nonprofit sector as a whole.
Additinal reading:
A war of words and egos broke out in the philanthropy world a few years back, one that paralleled a similar clash in the business world. On one side were the new "venture" philanthropists, who, flush with cash and confidence after revolutionizing the technology industry, were hellbent on triggering a similar revolution in philanthropy. Whatever traditional philanthropists were doing, the venture philanthropists concluded, wasn't working—society was still brimming with problems. Clearly, if you really wanted to save the world, you had to do more than write checks: You had to act. You had to find great people, help them build great social-service organizations, and then hold them accountable for their results. In other words, you had to attack social problems the way venture capitalists and entrepreneurs attacked business problems—with hands-on, we're-in-this-together, failure-isn't-an-option partnerships between investors and investees.
On the other side of the argument were the traditional philanthropists—the Establishment. For a century or so, they had given time and money to innumerable causes, and, in so doing, had made the world a better place. True, they hadn't fixed everything, but unlike some private-sector windbags, they had at least tried. Traditional philanthropists knew that they were often better at providing capital than doing actual social-service work and, therefore, that it was often best to give high-quality nonprofits the money and the room to do their thing. Traditional philanthropists also knew that you couldn't "measure results" at nonprofits the way you could at software companies—"reducing illiteracy," for example, was a harder objective to track than "selling licenses" or "generating free cash flow." Traditional philanthropists knew that much of what the venture philanthropists were espousing wasn't new and that some of what was new was also harebrained. The more support and adulation venture philanthropy garnered, the more traditional philanthropists took offense.
And no wonder: Reading some early treatises on venture philanthropy, circa 1999, brings back unfortunate memories of the dot-com era: There's lots of self-importance, hot air, and conviction that an enlightened few had discovered a revolutionary secret that had forever eluded the benighted masses. Some early venture philanthropists who waxed passionately about "investing like venture capitalists" had never been venture capitalists, nevermind philanthropists. And some weren't advocating a new style of philanthropy—they were just describing philanthropy that works. Thankfully, when the market crashed, much of the revolutionary rhetoric disappeared.
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