What Is Venture Philanthropy?

Venture philanthropy is a term used to describe a philanthropic approach that generally mimics the way that venture capitalists approach business. Traditionally, when wealthy people give money to a charity, they allow the charity to make all the decisions about how to use it, and they normally assume that the charity is using the money in the best way possible. In venture philanthropy, donors are looking at their donation similar to an investment, and they generally want some kind of metric for performance or efficiency. They also usually want some input into how the charitable organization operates, or at least a lot more communication about how things are being handled. This approach to philanthropy was mostly created by wealthy venture capitalists in the late 1990s who felt that the traditional philanthropy model was deeply flawed.

Normally, when charitable organizations are looking for donations, they will focus on the importance of their cause. For example, they might show how food shortages are personally affecting people in a certain part of the world and explain why it's important for people to donate money toward helping the people affected. With venture philanthropy, these things generally still are a focus, but there also usually is a more significant focus on performance. The charity might show statistics for how it has helped people in the past or cite studies to prove that it is using money wisely. The donor might also be given some basic assurances of greater communication and more personal involvement.

This general focus on results means that the charities are expected to be run in the most efficient way possible, and organizations might go out of their way to explain why their strategies are more effective than those of their competitors. This sort of openly competitive environment is often considered to be one of the more important aspects of venture philanthropy. In theory, competition for donor money with a more direct and aggressive quality could lead to better results in the end.

Many traditional charitable organizations argue that the ideas behind venture philanthropy aren't actually all that unique. They generally claim to have already embraced most of these practices, or at least tried them, and found that they didn't work for some reason. Others claim that venture philanthropy has had an influence by creating a bigger emphasis on results along with the relationship between the charity and the donor.