PMA Consulting, LLC

The Scoop on Venture Philanthropy

Photo courtesy of socialcapitalmarkets.net

If you watched “60 Minutes” on CNBC last night, you might have come across Eli Broad, the billionaire/philanthropist who has invested billions of dollars in the cultural landscape of Los Angeles, CA. His contributions were given to various L.A. organizations, such as: Disney Hall (home of the Los Angeles Philharmonic), Los Angeles Opera, and The Museum of Contemporary Art. In addition to his love for the arts, Broad established his own foundation, The Broad Foundations, to “advance entrepreneurship for the public good in education, science and the arts.” According to the Foundation’s website, the organization encompasses The Eli and Edythe Broad Foundation and The Broad Art Foundation which have assets of $2.1 billion. As noted in the “60 Minutes” segment, Broad runs his philanthropic foundation “like a for-profit business, not a charity.” Broad says: “charity is just writing checks.” Instead, he practices what is called venture philanthropy.  “We don’t give it away, we invest it. And we want a return. Remember, I started work as a CPA, so that gave me fiscal discipline in everything I did in business. I guess some of it carries over to philanthropy,” he said.

So, what exactly is venture philanthropy?
According to the National Venture Capital Association, Venture philanthropy “applies venture capital strategies, skills, and resources to charitable giving. It focuses on leadership, bold ideas, developing strong teams, active board involvement, and long-term investment. Traditional foundations and academics are closely following several organizations that are now applying venture philanthropy practices while working to build both for-profit and non-profit organizations.”

How is venture philanthropy different from individual contributions?
The Indiana University – Center for Philanthropy notes the following differences between venture philanthropy and traditional giving:

  • Traditional foundations usually give “hands off” grants, while venture philanthropists expect consistent engagement with nonprofits, viewing their contributions as “long-term investments.”
  • Traditional foundations usually provide one-time or multi-year grants, while venture philanthropists maintain a relationship with the nonprofit organization over a longer period of time, while providing strategic guidance.
  • The aim of venture philanthropy is to “build organizational systems and capacity focused on achieving lasting outcomes for the clients they serve.”

What are some examples of venture philanthropy organizations?
Various venture philanthropy organizations have emerged in the last several years. Here are some examples:

  • REDF (also known as The Roberts Enterprise Development Fund): REDF is a San Francisco-based venture philanthropy organization that creates jobs and employment opportunities for people facing the greatest barriers to work. For more information: http://www.redf.org
  • Social Venture Partners – Charlotte: (SVPC) is an organization whose members share a common goal of making a difference in their community and becoming more active and informed in their philanthropic work. For more information: www.svpcharlotte.org
  • Thrive Foundation for Youth: Based in Menlo Park, CA, Thrive Foundation for Youth operates like venture capitalists in the social sector, developing collaborative partnerships that blend creative thinking and knowledge to help deliver social impact at scale. For more information: http://www.thrivefoundation.org