To many people, the term venture philanthropy seems like a contradiction. Isn’t philanthropy about writing checks to worthwhile charities, donating to educational, religious, or healthcare institutions, and otherwise giving money or property to help the less fortunate? After all, giving to charity is no venture at all. True, it may come with a tax break and be the right thing to do, but that means it has nothing to do with business.
When it comes to charitable organizations and foundations, this view is literally shortsighted. Unlike an individual who writes a check to a charity at holiday time when he or she has some cash to spare, nonprofits and foundations must remain financially solvent themselves in order to help others. If they spend themselves broke this year, they won’t be able to provide philanthropic assistance next year. They need a way to keep their organizations fiscally strong.
To make philanthropy work over the long term, organizations have seen the wisdom of moving beyond the traditional grant giver/grantee relationship, as Eileen Cuniffee writes in an article for Nonprofit Quarterly, Increasingly, philanthropy focuses on purpose, results, and a responsibility-driven worldview. In this way, philanthropy has characteristics that overlap with for-profit business. Venture philanthropy serves as a blanket term for the structures and strategies used to make philanthropy financially sustainable. As a blanket term, venture philanthropy covers a broad space. Cuniffe notes an Organization for Economic Co-operation and Support report on venture philanthropy that calls out several common characteristics shared by disparate venture philanthropy organizations.
Venture philanthropy tends to focus on using its resources to create societal change. Resources are coordinated to make changes within systems, such as the educational system, healthcare system, or justice system. For example, an educational foundation may give funding to underprivileged schools to purchase supplies in an effort to create more educational equality. The intervention serves to alter the status of an entire system or sector, rather than an individual or specific organization.
Venture philanthropy also utilizes both grant giving and investment to create change. For example, by investing in pharmaceutical research, a venture philanthropy project may contribute to a cure for cancer. If the product succeeds in the marketplace, the philanthropic organization prospers, allowing it to fund additional medical research projects. Using this model, organizations are able to perpetuate their missions and have a greater social impact.