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1. What is venture philanthropy?
Venture philanthropy is an approach to charitable giving that applies venture capital investment principles to the voluntary and community sector. Key characteristics include high engagement, multi-year support, 'investing' in core costs and capacity-building, providing non-financial support such as marketing advice and networking, and performance measurement.
2. Is venture philanthropy new?
Modern forms of venture philanthropy began in the USA in the mid-1990s and spread to Europe about five years ago. However, elements of the venture philanthropy approach are not new. For instance some foundations invest in core costs and some individual donors are engaged with the charities they support, for example serving as trustees. A key differentiator is that venture philanthropy is a formal, structured approach that purposely incorporates the core principles of venture capital investment to its grant-making.
3. What type of organisations do venture philanthropists support?
Venture philanthropists support social purpose organisations which have capacity-building needs and where there the venture philanthropist can add value with its skills and expertise. The organisations typically are at an inflection point, such as preparing for rapid growth, offering a new product or service, or merging with another organisation. Venture philanthropists typically look for strong and effective leadership, at both the executive and board level, an entrepreneurial style, a focus on impact and accountability, and, importantly, openness to and capacity for a highly engaged relationship.
However, venture philanthropy is not suitable for all organisations. Both the assessment process and investment phase are resource-intensive, and not necessarily appropriate for those organisations that have little need for organisational capacity-building or that lack the capability to manage a very hands-on relationship with their funder.
4. What type of support do venture philanthropists provide?
In addition to customised financing – which may include grants, loans and/or 'quasi-equity' – venture philanthropists also provide non-financial, capacity-building support such as strategic planning, marketing advice and networking.
5. Do venture philanthropists sit on boards of the organisations they support?
Some do and some do not. However, most venture philanthropists will wish to have access to board-level information and they will work closely with both board members and senior executives to address strategic and operational needs.
6. Do venture philanthropists expect a financial return?
Venture philanthropists primarily seek a ‘social’ return rather than a financial return, and most use non-returnable grants to fund the charity. However, some also use below-market rate loans or seek to share in any surpluses generated by the charity, while others may invest in the equity of social businesses.
7. How do venture philanthropists measure ‘social return’?
Measuring social impact, or ‘return’, is of course much more difficult than measuring a financial return, and venture philanthropists will typically take an approach that is bespoke to the charity and the cause it is addressing. In general, though, they seek to measure longer-term impacts, rather than shorter-term outputs, of the organisation’s work. Some of these can be monetised to calculate a ‘social return on investment’ (SROI), such as the benefits of increased income and reduced unemployment from helping people into sustainable jobs (see case study of Getting Out to Work Merseyside, freely available from the New Economics Foundation). However, other social impacts are less suitable to monetisation, such as improved self-esteem or community cohesion, but can be captured through proxies and other measures. In all cases, however, the metrics to be used are typically agreed between the venture philanthropist and the charity.
8. How can I get involved in venture philanthropy?
Individual and institutional donors can get involved at a range of levels:
- Learn more by exploring the work of existing venture philanthropy organisations or the various resources published by the European Venture Philanthropy Association (EVPA).
- Invest in or volunteer time or expertise to a venture philanthropy organisation.
- Become more engaged in a charity that you already support.
- Establish your own venture philanthropy fund. EVPA offers a variety of resources to help get you started.
