Venture philanthropy
How business principles are transforming philanthropy to focus on outcomes
Historically the domain of wealthy individuals and large foundations, venture philanthropy is growing rapidly—particularly among Millenials. Using principles that have made venture capital so successful, funders actively engage in supporting organizations, helping to maximize their social impact and solve pressing social or environmental problems.
Venture philanthropists generally take a more comprehensive, active and longer-term approach than conventional donors. Their giving exhibits other hallmarks such as an increased emphasis on tracking and monitoring progress and performance.
At its core, venture philanthropy is a collaborative, cross-sectoral endeavor, often involving public-private partnerships. These can include nonprofit entities, non-governmental organizations (NGOs), social enterprises or for-profits—all focused on solutions to pressing societal or environmental issues.
A storied history
Venture philanthropy has its roots in the late 19th century, when luminaries like Andrew Carnegie and the first John D. Rockefeller pioneered a bold new style of private philanthropy. They applied their entrepreneurial skill and belief in science to tackle illiteracy and poverty and support medical research.
Throughout most of the 20th century, however, most philanthropy involved simply donating to a cause and then stepping away without further involvement, relying on the recipient to decide how best to utilize the gift.
Fast forward to the late 1990s, when venture philanthropy, or what is sometimes called “catalytic philanthropy,” started to gain popularity alongside the rise of the Silicon Valley entrepreneurs, who naturally gravitated toward the practices that made venture capital investments so successful. They began to apply these principles to their philanthropic investments.
In the 1960s, John D. Rockefeller III coined the term “venture philanthropy” in describing “an adventurous approach to funding unpopular social causes.”
In the 1960s, John D. Rockefeller III coined the term “venture philanthropy” in describing “an adventurous approach to funding unpopular social causes.”
A more modern vision
With its emphasis on creating social benefits beyond the immediate effect of a financial grant, venture philanthropy is now a major movement. Today’s venture philanthropy exhibits several distinctive characteristics, including:
- A focus on solving pressing social or environmental problems
- Emphasis on interventions that can be scaled to support collective efforts to drive impact
- Funding mechanisms that are structured to include targeted grants and/or investments
- Extensive non-financial support, including capacity building and advisory services
- Active involvement with a focus on innovation and risk-taking in finding solutions
- Application of measurement tools, such as tracking performance and measuring outcomes
Like business investors, the donor is more engaged in seeking a solution—as opposed to a sole focus on economic profit—and is committed to oversight in terms of tracking and measuring effectiveness, progress and performance.
The focus on outcomes while driving toward a solution is always the guiding ‘North Star’ encouraging continual program improvement based on measurable impact.
The focus on outcomes while driving toward a solution is always the guiding ‘North Star’ encouraging continual program improvement based on measurable impact.
What lies ahead?
Historically, venture philanthropy was purely the domain of large institutions and family foundations but is now more accessible to smaller foundations and wealthy individuals. Millennials—with their focus on donating to social and environmental causes—have been a major driving force behind the rise in its popularity.1
With its comprehensive, hands-on approach and focus on tackling big societal issues, venture philanthropy will no doubt continue to be a major force shaping the philanthropic landscape.
Dive deeper
To learn more, see our piece, What is venture philanthropy? Connect with a ۶Ƶ Financial Advisor to learn more about how ۶Ƶ can support your strategic philanthropy.
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