Philanthropy is conventionally defined as activity aimed at promoting human welfare of one kind or another, as any dictionary will tell you. Conspicuously absent from the definition is any mention of profit or for-profit business strategies which suggests that a growing number of today's philanthropic movers and shakers don't read dictionaries.
Talking about philanthropy, capitalism and investor-savvy principles in the same breath may sound oxymoronic–perhaps even offensive to some ears. But that hasn't stopped such thinking from capturing imaginations in the charitable-giving space. Using philanthropic pools of capital for investing in for-profit entities and viewing philanthropy through a venture capital-inspired prism are concepts that attract attention–and dollars–in the 21st century.
Consider so-called venture philanthropy. Yes, the term takes in a lot of territory and means different things to different people. For some, it's taking a page from traditional venture capital strategies and mixing it with philanthropy as a tool for engineering superior results in tackling social ills.
One example is the eight-year-old Venture Philanthropy Partners (VPP) in Washington, D.C. On the surface, it's one more foundation that's funding non-profit organizations. What's different is that VPP looks at the non-profit world through venture capital-tinted glasses by entering into “investment partnerships” with non profits, rather than simply donating money. VPP says its VC-oriented strategy enhances the odds of improving the efficiency and effectiveness of social organizations. VPP's agenda ranges from helping a non profit attract new sources of funding to recruiting and retaining talented employees. In turn, progress on these fronts helps the non profit achieve its primary goals.
There's also a new breed of non-profit organizations that are on the leading edge of blending conventional charitable work with aspects of for-profit investing. The nine-year-old Pacific Community Ventures is a San Francisco non profit that runs several venture funds that invest in private companies. The goal: To help low- and moderate-income communities while generating a “competitive” return for investors–so-called “double bottom-line” returns.
The inspiration for pushing the boundaries of philanthropy in recent years comes in part from a new wave of disillusionment with traditional strategies of organized giving. In 2004, multi-billionaire eBay founder Pierre Omidyar raised a few eyebrows when he closed his five-year-old foundation, citing frustration with the limitations of conventionally structured philanthropy. In its place, the French-born Iranian-American entrepreneur and his wife launched the Omidyar Network, a self-described philanthropic investment firm that's “uniquely structured” as both a non-profit charitable organization and a limited liability company. In line with its dual status, Omidyar Network makes grants through its non-profit channel and invests in for-profit ventures through its LLC division.