When does Venture Philanthropy come into play?
Venture philanthropy applies most of the principles of venture capital financing to invest in start-up, growth, or risk-taking social enterprises. It is not explicitly interested in profit but rather in investing to promote social good, such as socially responsible investing (SRI) to meet environmental, social, and governance (ESG) criteria.
Venture philanthropy not only offers financing plans that are specifically tailored to the capacity-building needs of a company or organisation but also features a high level of investor scrutiny and engagement.
Venture philanthropists, for example, use venture capital, equity, or loans to provide long-term support for social, environmental, or community projects. Recipients are usually non-profit organisations or social enterprises, i.e., support for universities and schools or the establishment of foundations or non-profit organisations. The focus of these efforts is on the sustainable specialisation of the funded organisations and not on the mere promotion of individual projects.
Beginnings in the 1960s
The term “venture philanthropy” was used by John D. Rockefeller III in 1969 to describe it as “an adventurous approach to funding unpopular social causes”.
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Venture philanthropy is largely driven by a growing public perception that traditional funding mechanisms (investments, government and university grants, etc.) do little to fund non-profit organisations and other socially beneficial industries.
Venture philanthropy can provide high-impact venture capital that other types of investments often cannot. Venture philanthropy can be a means to make a difference and bring about change with your investment. It could be observed that more and more is being invested in venture philanthropy, and this trend.
