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Venture Philanthropy

by Emily Stonor

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Are you the giving sort?  And if not, what stops you?  If it’s because you don’t have time, don’t know how, or don’t trust most existing charities, there’s a new trend that might interest you.

It’s called ‘venture philanthropy’ and was first dreamt up in 1995 by Christine Letts, a Harvard Professor.  She saw that too many charities were constrained by the way grants were usually given.  The common insistence on funding individual programmes, and the reluctance to pay for core costs, made it hard for the charities to attract the right staff, to get proper computer or accounting systems, and generally maximise their potential.  Venture philanthropy aims to do something about this, taking the best business practices and applying them to charitable undertakings, making sure that the structure is right.  This means taking managed risks, building close working relationships, developing tools to track effectiveness, and, above all, generating measurable returns, whether social or financial.  

In the US, this approach appealed immediately to many business people.  Almost all the funds set up on this model concentrate on a single cause or region.  Prominent successes include the Robin Hood Foundation, set up to help the poor of New York by Wall Street heavy hitter Paul Tudor Jones, and Social Venture Partners in Seattle – a network of entrepreneurs who donate their time as well as their money to youth and education projects.  This wave may have originated in America, but it’s been heading across the Atlantic, and is set to crash on European shores.  At this very moment, several top British businessmen are collaborating with cutting-edge charities, and plan major announcements in the near future.

It’s very important that they do work together, because preconceptions on both sides of the business: charity divide could cause serious damage.  Many business types can be too quick to dismiss experienced charity management, without realising that the problem may be lack of support.  In fact, charities can be very innovative, and have been responsible for some truly major initiatives, like Comic Relief and the campaign to write off Third World debt.  Charities, for their part, may give business too wide a berth, fearing that suits may be too keen to dominate, and so desperate to impose business rules that they lose sight of the original mission.  The painfully obvious truth is that both have much to offer, and it would be a screaming shame if they failed to learn each other’s language and make it work.

It’s one thing to figure out the how of better giving, but if successful people are to be persuaded to give more, it’s also important to look at the why.  It’s all very well to cite compassion and the underlying importance of the project, but that may not be enough to prise open that elusive chequebook.  Charities may need to look more carefully, more honestly, at what motivates donors, even if that means asking that tough question, “what’s in it for them?”   It depends hugely from person to person.  Some want their name over the door, or wide social recognition or access, while others crave anonymity.  But, If there’s a common thread amongst involved companies, it’s probably the wish to ensure that the project is being done properly.  Few businessmen have the time for hands-on involvement, but a growing band do make the effort, and want to put their sharply-honed skills to work in a quite different setting.  

This still leaves the issue of how to marry up donors and projects.  For every person who knows exactly what good cause they want to support, at least twenty are probably bewildered by the massive array of possible candidates.  Interested parties may want to find a way through this maze, but don’t necessarily want to be on the receiving end of hundreds of begging letters.  It’s tempting to suggest that we need a sort of First Tuesday forum where potential donors can meet up with recipients interested in the venture philanthropy approach.  In practice it would be very tricky, and you could bet your bottom dollar that donors would be heavily outnumbered.  On the face of it, it seems an area where the Internet could fill part of the gap, allowing even the shyest donors to check out which charities are out there.  For this to work well, it would have to go beyond mere listings – at a minimum a proper slicing and dicing by sector and scale – but stopping short of active rankings or recommendations, which carry heavy-duty subjectivity, and will cause most charities, understandably, to freak out.

Of course, the marvellous thing about giving is that you can support absolutely anything you want.  If there isn’t an existing charity doing whatever it is, get on your bike and set it up.  Or if you’re impatient to become a venture philanthropist, get a few friends together, decide on your causes, and start making a difference.  You are an entrepreneur, aren’t you? 

Emily Stoner works at the UK-based Institute of Philanthropy.

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