Venture philanthropy is a subset of traditional philanthropy. It differs from traditional philanthropy in that venture philanthropists are looking to make measurable, positive change in the world and also expect a return on their investment. Venture philanthropists want to find high-impact opportunities to invest their money, time, knowledge or skills in order to create measurable social impact.
Venture Philanthropy is simply “philanthropy on steroids.” It takes either an individual or a large corporate donor and gives them the power to take on problems at a global scale. The major difference between traditional philanthropy and venture philanthropy lies in its goals: Venture philanthropy seeks measurable results, such as increased enrollment in school or reduced number of patients with disease; whereas, traditional philanthropy either has no goals or goals that are very hard to measure, such as alleviating human suffering or preserving a culture.
In what ways is it similar and different to traditional philanthropy?
Although venture philanthropists expect a return on their investment, this difference does not necessarily equate to the VC maxim of “one dollar invested in a startup should yield at least three dollars of growth.” In fact, venture philanthropy’s goal is not to generate a financial return. Instead, its returns are measured in terms of social change, which it expects will make the world a better place. Venture philanthropy projects tend to be large-scale and transformational rather than smaller or local projects that traditional philanthropy supports.
Where does this unusual term originate?
The term “venture philanthropy” is derived from the venture capital industry. Venture capitalists are generally extremely wealthy individuals or corporations that provide funding for startup companies with high-risk/high-reward potential. They do not necessarily expect to receive a financial return on their investment, but they aim to achieve a significant social impact.
What are the benefits of venture philanthropy over traditional philanthropy
There are many benefits to venture philanthropy over traditional philanthropy. With traditional philanthropy, donations are not an investment. The donor may choose to give money to a charity with the hopes that it will help others, but they do not receive any rewards or future benefits from the donation. Venture philanthropists are more concerned with ensuring that their donation has a positive impact on the world while also proving some form of return on their investment. Therefore, venture philanthropy is more likely to receive support from individuals and companies that wish to see the results of their efforts. This means more vested interest.
Three reasons to consider going beyond traditional philanthropy
With venture philanthropy, one can have a positive impact on the world at large rather than just in their community. It may be more difficult to measure social change due to the complex nature of society but it is more meaningful since it lasts for generations. Finally, venture philanthropy may help one feel less powerless with regards to global issues that affect their communities. For instance, a donor may feel angry about the state of public education in their community and want to invest in one school. With traditional philanthropy, they would have to aim for a much less effective universal solution – for instance donating money to an educational foundation. With venture philanthropy, they could directly invest in that one school, which is more likely to yield a visible positive result.
Who are famous venture capitalists?
There are many examples of venture philanthropy from many sources around the world. Here are a few from people you may have heard of…
- Bill & Melinda Gates – Bill and his wife, Melinda are probably one of the most well known venture philanthropists in America. They are extremely active in global health and have donated over $27 billion dollars to various education initiatives.
- Michael Dell – He’s the founder of Dell Computers and worth $ 15 billion dollars. He is probably most famous for his educational charity, Michael & Susan Dell Foundation. It supports various projects in India aimed at improving access to quality education.- Paul Allen – Paul is the co-founder of Microsoft and is worth $ 14 billion dollars. With his wealth he has become a major venture capitalist and philanthropist. His foundation focuses on tackling global health problems and wildlife conservation.
- Azim Premji – Azim Premji is the chairman of Wipro Technologies and is worth $ 12.1 billion dollars. He has given much of his wealth to his educational charity, Azim Premji Foundation which focuses on improving education in India.
- Phil Knight – Phil Knight is the founder of Nike and is worth $ 13.1 billion dollars. He founded the Nike Foundation which focuses on fighting poverty and creating support for women in developing countries around the world.
- Sulaiman Bin Abdul Aziz Al Rajhi – Sulaiman Al Rajhi is the co-founder of Al Rajhi Bank, one of Saudi Arabia’s largest banks, and is worth $ 8.7 billion dollars. He is the president of the Al Rajhi Charity Foundation which partners with local organizations to provide aid in more than 60 countries around the world.
- James Clark – James founded Netscape in 1994 which made him a multi-billionaire. He eventually left the company, but his foundation has donated millions of dollars to support AIDS research.
- David Rockefeller – David is the former head of Chase Manhattan Bank and has donated money to various conservation efforts.
- George Soros – Mr. Soros is a noted philanthropist and has donated more than $8 billion dollars to his Open Society Foundations, which focus on promoting human rights and democracy around the world. He also spent $1 billion dollars as one of the top stockbrokers during the 1992 Black Wednesday UK currency crisis.
- Warren Buffett – Warren is the second wealthiest man in America and has donated more than $23 billion dollars to various charities.
Venture philanthropy emerged with changing trends in society, but it also changed how people think about wealth. Today, entrepreneurs and investors are not simply looking to make money; they also want to leave a lasting impact. Philanthropy offers the perfect solution and will continue to evolve as we enter the second decade of the 21st century.
Why should a donor give beyond the dollar?
A donation, when done right, is given out of love and empathy for those less fortunate than oneself. While this desire to help others is beautiful it’s important that donors don’t use that as an excuse to neglect their own needs or happiness. In other words, although a donor should consider how their donation can improve the lives of others they should also consider that this money could be used to invest in themselves or their family.
Today’s donors have more options than ever before and often need to take advantage of many different solutions in order to address complex social issues such as poverty, violence, racism/discrimination, and other complex issues. Donors should take the time to research all of their options, even those that are outside their comfort zone – traditional philanthropy or venture philanthropy.
How do you measure impact at scale?
There are two reasons why it is difficult to measure social change at scale: first, complex issues such as discrimination and violence are not easy to quantify. For instance, one could look at how many people were killed in a year but the number of people who experienced discrimination may be much larger than that statistic suggests. Narrative studies can provide more insight into these complex issues, such as through ethnographic research. Second, social change is often incremental and does not have clear thresholds of success.
Why might the term “venture philanthropy” scare some people off?
Some may be afraid to venture outside their comfort zone and try something new. But there is nothing wrong with trying out a solution that is different from what they are used to or comfortable with. In fact, this could lead to even more positive change in the world than before.
Why is it crucial that donors look outside traditional philanthropy?
Because society is changing rapidly, it’s important for donors to keep up with these changes and evolve their strategies accordingly. Some people may want to stick with traditional philanthropic organizations because they are comfortable with them or they’ve been donating to them for years. But things are constantly changing and it’s important that donors adapt their strategies in order to stay on top of these changes.
How has traditional philanthropy changed?
Traditional philanthropic organizations, such as soup kitchens or hospitals, have existed for centuries. However, the processes through which they go about their work has changed over time to suit the needs of modern society. For example, soup kitchens and other traditional charities should consider how they can be more effective and efficient with donors’ money instead of simply providing a product (in this case, soup).
The impact of the economic downturn
Some people blame it on Wall Street and others blame it on greed and corruption, but one thing is clear: the 2008 recession changed philanthropy. Venture philanthropists realized that they can’t simply donate money and expect to make a difference in people’s lives because this money could be used much more effectively in other ways such as providing microloans. This does not mean that traditional philanthropic organizations such as soup kitchens and hospitals should stop what they’re doing; it simply means that those organizations need to evolve their strategies in order to help people who are experiencing poverty, violence, discrimination, and other complex social problems.
What is the difference between philanthropy and impact investing?
Philanthropy is all about making a difference in the world. This can be accomplished through traditional means, such as donating money to nonprofits or hosting fundraisers for charities. Venture Philanthropists are different because they have a “bottom line.” Unlike typical philanthropists, venture philanthropists expect a return on their investment. They’re looking for more than just a feel-good accomplishment. The goal is to create measurable positive change in the world while also showing an impact to the bottom line.
Impact investing is a combination of traditional philanthropy and venture capitalism. Rather than just donating money to an organization, impact investors invest in qualified nonprofits or social enterprises with the expectation that their investment will generate meaningful social returns. This means impact investors make investments for financial return while also achieving their desired social goals
In conclusion Venture philanthropists are looking for more than just a feel good accomplishment. Venture Philanthropies want to create measurable positive change in the world and also have a “bottom line.” Unlike typical philanthropists, they expect a return on their investment. That return may be in the form of lower costs for services, increased access to those services or improved quality of life.
Caveats and disclaimers
We have covered many topics in this article and want to be clear that any reference to, or mention of impact investing, venture philanthropy approach, venture philanthropy work, social enterprises, private foundations, non financial support, business model, non profit organizations, impact investments, word of the day, chicago public schools, climate change, more money, social impact, investment, word, venture, support, words related, funding, investor, social good, investing, invested, access, discover, growth, examples, foundations, development, business venture, concerned, commitment, children, funded, definition, engage or seek in the context of this article is purely for informational purposes and not to be misconstrued with investment advice or personal opinion. Thank you for reading, we hope that you found this article useful in your quest to understand ESG.