Venture
Philanthropy
Guide.org

Natasha van Bentum, CFRE

• Introduction
  
  
• What
  
  
• Why
  
  
• VP Organizations
          &
  
• Social Entrepreneurs
  
  
• Gift Planning
  
  
• Articles
  
  
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What is venture philanthropy?

"The venture philanthropy field is so diverse and unsettled it resembles the Wild West."   -- Mario Morino, Morino Institute

Venture philanthropy has several definitions. It's commonly assumed to take the principles of venture capitalism and apply them to philanthropy.

• "Venture philanthropy means funding organizations that support enterprising nonprofits and social entrepreneurs with not only financial resources, but also management and technical support as well. This support is focused on enabling nonprofits to build greater organizational capacity and infrastructure via long term, engaged relationships with investees." Social Venture Partners

• "Combining the passion and commitment of the nonprofit world with the efficiencies and advantages of the New Economy."

• "It's all about supporting and building capacity."

• Peninsula Community Foundation claims to have first used the term "venture philanthropy" back in 1984.

But before looking at what more people say venture philanthropy is, let's see what venture philanthropy is NOT, according to Mario Morino, a leading advocate of venture philanthropy.

"We are not a venture capitalist's answer to philanthropy. Venture capitalism is, for the most part, a mercenary business. It is focused on fast investment and even faster returns, and it imposes dramatic consequences for failing short of either. Venture capitalism serves its purpose. But it is not our purpose.

"Our purpose is to boost the capacity of the nonprofit sector to provide services that enrich people's lives. We seek a real, long-term commitment that marries the passion and commitment of the nonprofit world with the efficiencies and advantages of the New Economy. Both sides can learn. Both sides can benefit."

Here is a classic definition of venture philanthropy from one of the earliest practitioners of venture philanthropy, the Peninsula Community Foundation and its Center for Venture Philanthropy. "Venture Philanthropy refers to the nonprofit sector's application of certain practices used by venture capitalists when investing in new business ideas. There are 5 key elements of venture philanthropy:

• a managing partner relationship
• investments in long-term (3-6 yr.) business plans
• an accountability-for-results process
• provision of cash and expertise
• an exit strategy

Investors make long-term funding commitments, closely monitor performance objectives through predefined measurement tools and problem solve jointly with the nonprofit team on a regular basis." Center for Venture Philanthropy, Peninsula Community Foundation, Founder Sterling Speirn says, "Venture philanthropy invests in social entrepreneurs who have developed programs that produce significant social return."

According to the major report "Unleashing New Resources and Entrepreneurism for the Common Good" venture philanthropy is motivated by the following values and beliefs:

• outcomes/impact thinking
• market concepts as a driver for designing social products and services
• investment is more effective than charity
• wealth creation should be balanced with public responsibility
• sustainability of social change needs to be supported through philanthropic and earned income.

A case study on venture philanthropy by Melinda Tuan and Jed Emerson can be found at Roberts Enterprise Development Fund's web site.

"What is needed is not new solutions to social problems but new ways to find and support successful nonprofits so they can grow and build on their success." Mario Morino