Venture philanthropy originated in the mid-1990s in the United States and began spreading through Europe around 2002. It is largely modeled after venture capitalism, in which professional investors use third-party funds to help startup businesses get off their feet.

In a similar way, venture philanthropists use their influence and skills to provide charities or socially minded enterprises with financial and non-financial aid. Venture philanthropy is often undertaken by organizations, which lend support to anywhere from 3 to 15 charities or socially conscious businesses. Individuals, families, and institutions usually provide the organizations’ funds.

The venture philanthropy movement originally began as an alternative to traditional philanthropy, in which high-quality nonprofits are given capital and room to work as they see fit.

Meanwhile, venture philanthropists are much more highly involved. Beyond just donating significant amounts of money, they may hold positions as board members or offer skills-based donations, such as business planning or executive coaching.

According to a 2004 report by Venture Philanthropy Partners, small and local nonprofits often lack the support they need. They can, therefore, be significantly helped by venture philanthropy, which provides long-term financial support, strategic advice, and helpful professional connections.

Depending on the goal of the philanthropy, and the types of organizations supported, venture philanthropists often choose to give in different ways. While some organizations dole out non-returnable grants seen as investments with only social returns, others use various types of loans to help charities or social enterprises get started and continually grow. Once these loans are repaid, the money is reinvested in another organization or startup company.

Venture philanthropists also generally commit to multi-year support at a substantial level, with the goal of financial independence once funding ceases. Additionally, venture philanthropists aim to improve the long-term viability of their investees by funding core operating expenses, rather than individual projects or programs.

Finally, venture philanthropists highly emphasize results and good business practices. They generally hold their recipients to high accountability and management standards, and expect goals to be achieved. This highlighting of measurable outcomes is one of the more obvious similarities between venture philanthropy and venture capitalism.

Venture philanthropy allows donors to become highly invested while working with charities and social entrepreneurs. It also provides many organizations, especially small and local ones, with the long-term and varied assistance they need.

By providing an alternative to hands-off donations, venture philanthropy encourages people to actively change the world around them. It has possibly even substantially widened the range of people becoming philanthropists by appealing to a field of entrepreneurs whose experience and expertise can be valuable assets to charities and socially conscious startup businesses.

Venture philanthropy offers a unique and very often successful approach to improving our society and the world, and should therefore enjoy continued support.

– Katie Fullerton
Sources: Social Innovations Europe, Forbes, Slate, Venture Philanthropy Partners
Photo: Francis Moran