The Business of Philanthropy

  • SumoMe

Venture capitalists; who hasn’t heard of them and their ilk? Snapping up every up-and-coming talent in sight, rescuing the flailing boats of good ideas, they manage to make news every now and then. Ever so often, we read about a start-up by a bright young Indian being given funds by venture capitalists across the globe.

 

Venture philanthropy, sometimes called philanthrocapitalism as a tongue twister, is in a few words the business of doing charity. It may be a lesser-known and perhaps strange concept but is no less powerful than that of venture capital. Taking the management concepts and business acumen from venture capital finance, venture philanthropy seeks to apply them effectively to fulfil philanthropic ends. It moves beyond the traditional approach of simply providing funds to organisations engaged in socially responsible activities. Rather it seeks to support and empower these organisations by investing skills into the actual operations.

 

Venture capitalists often ask for a certain degree of supervision and control in return for their money; venture philanthropists similarly ask for a degree of freedom to help establish the technical and management aspects of the organisational functioning. This funding is often also known as ‘patient capital’ as the philanthropists are not looking at their exit strategy right from day one. Establishing a functioning and effective philanthropic model, that can sustain itself in the long run and reach out to larger number of people, are the returns they aim for.

 

The venture philanthropy model is believed to have been pioneered in the US and has also recently taken wings in other western countries such as the UK and other parts of Europe. Individuals from different walks of life come together and bring in not only funds but also professional expertise to serve the target market. While philanthropy initially started out with large donations by high net worth individuals and organisations, it was soon understood that this simply was not enough. Soon it evolved to include hired professional staff to take care of all the operations of the philanthropic venture. Venture philanthropy in its current form encourages partnerships between people and the causes they believe in. From being mere fund providers, people are now actively involved with the organisations they support. Acumen Fund is one of the better-known examples that come to mind. Other organisations include Social Venture Partners, New Profit Inc.

 

While currently more established in the western countries, the venture philanthropy model may just be the developing world’s best bet. Traditional aid has fallen short on several counts and often never fails to reach its target audience. Donors bring in their own stipulations and this works against the efficacy of aid channelling. While several institutions provide skill set training for people looking to enter the development sector, there is a considerable gap in the human capital requirements and the current situation. Lesser salaries, tedious red tape and bureaucratic requirements, limited autonomy have all served as deterrents for the most enthused of people.

 

Venture philanthropy, while not a panacea for all problems, does promise to bring in a fresh and innovative approach, characterised by the willingness to experiment. As professionals work together to achieve common goals, bringing in accountability, transparency, and open benchmarking in this process seems to be a natural outcome. Building capacity and strength takes precedence over established processes.

 

As the philosophy is to get things done rather than stick to conventional processes, it is likely that venture philanthropy will bypass many of the conventional obstacles with unconventional approaches.

 

For countries such as India, where some of the brightest talent in this world and the pitiful examples of poverty, disease and illiteracy co-exist, venture philanthropy is perhaps an idea whose time has come. If every individual were to take upon himself and herself to contribute not simply monetarily but with skills and talents, we may be able to cross the insurmountable development obstacles to achieve more inclusive growth.

 

Shruti Saxena

[Image source:http://www.evpa.eu.com/images/VP-diagram.jpg]

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