Venture Philanthropy

VENTURE PHILANTHROPY: Could this be the next step in Charity?

The charitable nature of people is as old as humanity itself, but where does it come from? What influences the decision to give?

Our instinct for self-preservation has led to our obsessive compulsion with accumulating as much material wealth as we possibly can. Looking at the 1% that does succeed in accumulating wealth, we can see a few traits both good and bad that govern the way they live. Some try to preserve this wealth by passing it down to their children who they hope would it for the improvement of their lives and those of others as well. Other wealthy patrons realize that they can’t take their wealth with them, case in point, the Egyptian kings who were buried with their wealth and it was later unearthed. There are two paths to follow when you realize that you can’t take wealth with you, one is, you could squander it and the other is use it to do a little bit of good in this world.

Warren Buffet, one of the world’s wealthiest men, once stated: “Doubling your net worth won’t make you happier.” Following this statement, he pledged to be a part of the Bill and Melinda Gates Foundation where he would give a lot of his wealth to improve the lives of others.

Despite the fact that extreme poverty has been cut in half over the past 30 years, there are and might always be the less fortunate who will lack the bare minimum necessities to lead a dignified life.

Today, philanthropy defines the charitable undertakings to human causes by wealthy patrons and organizations.

World-renowned philanthropists Charles Bronfman and Jeffrey Solomon define the art of giving as the place where the soul meets a business plan. For wealthy donors, the art of giving has become a science of sorts, with several paradigms, each defined by distinct traits. This is far from the more common and traditional impulse philanthropic model where individuals and corporates gave simply out of concern and the ‘feel good’ effect of being generous.

Today, donors focus on endeavours such as impact philanthropy, where monitoring and evaluation of the recipients of aid are religiously undertaken. Organizations call it impact-based CSR initiatives, which focus on achieving some set sustainability goals. In the same vein, a new class of philanthropists who seek to leave a significant impact on the public sphere has emerged over the past decade or so. A 2014 report by the Organization for Economic Co-operation and Development (OECD) described such emerging models as hybrid forms of philanthropy, which essentially involve leveraging business thinking. As such, this new wave of philanthropy features extensive research and capacity building that has enhanced the relation into one of partnership. One such form is venture philanthropy.

There have been many attempts to define venture philanthropy. The term was coined way back in 1969 by Rockefeller III but has surprisingly only caught on in the 21st century. It seeks to borrow the principles of venture capital investment and apply them to philanthropy. The OECD report, Venture Philanthropy in Development: Dynamics, Challenges and Lessons in the Search for Greater Impact, remarked that it has no specific definition. Similarly, I will also refrain from attempts to define it, but rather, this article only endeavours to describe its nature. A graphic comparison between venture philanthropy and the traditional model in terms of investment and engagement is shown in the image below:

Venture philanthropy is a sweeping term that articulates the emerging models of philanthropy which many organizations, individuals, and donor foundations are now gravitating towards.

The report noted that many models of venture philanthropy exist, but that they share several common attributes. For one, it involves a strategic coordination of donor resources in order to bring fundamental transformation. The main focus is also on systems and is sectoral, as opposed to targeting individual people or organizations. This allows venture philanthropy the freedom to involve and engage with several stakeholders, including individuals, social enterprises, local communities, private equity and corporations, foundations, and government. Unlike the classic model of philanthropy, it employs a mix of donations and investments in funding its undertakings. As such, the donors are much more participative and form a close relationship with aid recipients. Additionally, this relationship is long-term, often lasting more than five years and even up to ten. This exposes venture philanthropists much greater risk than traditional forms, necessitating the use of business-level monitoring and evaluation mechanisms to ensure performance levels mimic those of a corporation.

The European Venture Philanthropy Association (EVPA) defines venture philanthropy as a form of social investment. This exemplifies its goal of supporting social enterprises and other such socially oriented organizations in order to build their capacity to solve societal challenges. The image below brings together the multiple pieces and components that make up the term venture philanthropy.

Does venture philanthropy work? Is this new social entrepreneurship all that it’s cracked up to be? While pairing philanthropic efforts with the demands of bottom line capital is easier said than done, there are several examples of success stories in venture philanthropy from OECD studies. The Emirates Foundation for Youth Development and Financial Literacy is a public-private funded group that supports initiatives which enhance the well-being of youths in the UAE. The foundation

remodelled its operational approach to educating the youth with the aim of building leadership skills, develop emergency aid skills, and lately, financial literacy. The change included a commitment to long-term funding, a collaborative partnership approach and committed monitoring and evaluation. Since the change took place, the impact of its activities has been felt across the board. Social inclusivity and financial literacy have increased among the youth; more support has increased from financial and non-financial organizations, while collaboration between traditionally competing organizations has increased. The Lundin Foundation and Comaco also used the venture philanthropy approach in its wildlife conservation efforts in Zambia. Their research-based model found that poaching activities had a causal connection with poor food security in the communities around national parks. This helped to redirect funding from prior conservation efforts to these communities, helping to restore the ecosystem in the various areas, assisting farmers to increase food

production and find a market for their produce. After dedicated monitoring and evaluation, results showed that the population of wildlife in national parks had stabilized and also revived in areas were then animals had been decimated. Similarly, food security had returned to the local populations and had drastically improved their welfare. Many other such examples exist across the globe, whether it is Shell Foundation in its environmental programmes, or the Rockefeller Foundation and its climate-focused endeavours. So to allay your doubts, yes, venture philanthropy does indeed work, not just well enough, but profoundly and emphatically so. Actors with philanthropic affiliations and those already participating should adopt venture philanthropy in order to leverage well known and established commercial approaches to solve social challenges ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊