Venture Philanthropy Aims for More Effective Ways to Solve Difficult Challenges

Wealthy philanthropists once donated money to the causes they supported for the pure satisfaction of helping to build a better world. Now, however, many philanthropic foundations take a more hands-on approach.

Instead of handing out money to a broad array of organizations, foundations often target specific causes or areas of concern and closely monitor how the funds are spent — often for years or decades.

Venture philanthropy models itself on the venture capitalists that guide the development of small companiesWelcome to the brave new world of venture philanthropy, also commonly known as “strategic philanthropy” or “impact philanthropy.” A recent report by the Rockefeller Foundation defines the practice as an entrepreneurial approach to philanthropy that identifies, analyzes, coordinates and supports self-sustaining solutions to problems. The focus is on achieving the greatest impact.

The term first came into use in the late 1960s as a small number of foundations sought better ways to solve what seemed to be intractable world problems. The practice received a large boost in the late 1990s, when it was embraced by the Bill and Melinda Gates Foundation, which focuses on global health and economic development.

The more recent recession, which squeezed the flow of money in every imaginable way, caused many other foundations to jump on the venture philanthropy bandwagon.

Setting big goals and creating accountability

In venture philanthropy, grant proposals can often be lengthy and detailed, spelling out step-by-step just how an organization plans to spend the foundation’s money. Then, quite often, the foundation will monitor progress at frequent intervals.

“The world won’t get better by itself,” notes Sue Desmond-Hellman, CEO of the Gates Foundation. “We must set big goals and hold ourselves accountable every step of the way.”

The Gates Foundation collaborates with grantees and other partners to harness “the transformative power of science and technology.” The foundation and its partners collect and share data, review lessons learned and shift course if necessary.

Smaller foundations have now adopted the same activist philosophy. The Steven and Michele Kirsch Foundation, created in 1999 and based in San Jose, California, supports causes involving clean air and the elimination of nuclear weaponry in addition to a variety of Silicon Valley charities. Notably, it invokes a provision in the tax code permitting it to engage in some lobbying efforts.

“The whole point of giving is to make a difference in the area you are focused on,” says founder Steve Kirsch. “Suppose I want to clean up the air in California. I could give out grants willy-nilly to worthy organizations that are working on some aspect of the problem. But to really solve the problem, you need to pick a credible path, and align the resources behind the plan. Then you have everyone rowing in the same direction with the same goals.”

While the reach of large foundations can be huge, some employ a laser-like focus to fund initiatives of a small, localized nature. For instance, the Soros Economic Development Fund works on a global scale to eliminate poverty, hunger, global warming and environmental destruction. In keeping with that, it supports a program called CleanStar Mozambique.

African societies typically use charcoal for cooking, a practice that results in indoor air pollution and consequent health problems. CleanStar Mozambique eliminates that by distributing clean, low-emissions gas stoves to households in Mozambique cities and rural areas.

Some initiatives attract controversy

Venture philanthropy has been known to provoke a degree of controversy. During the 1980s, a host of right-leaning foundations such as the Richard Mellon Scaife Foundation rose to prominence. Besides donating to a variety of inner-city health and educational charities, the Scaife Foundation also endowed organizations with an overtly political bent.

More recently, foundations of all political stripes have funded projects to reform America’s inner-city schools, where they’ve often encountered resistance from the educational establishment.

In a 2012 post on Academe, a blog of the American Association of University Professors, Kevin Kumashiro, a professor of Asian American studies at the University of Illinois at Chicago, lamented the involvement of “the business elite” in public education over the past three decades. “Current reforms are allowing certain individuals with neither scholarly nor practical expertise in education to exert significant influence over educational policy for communities and children other than their own,” Kumashiro wrote.

Kumashiro sees sinister motives at work in these endeavors, including union busting and the wholesale privatization of the educational sector. Countering Kumashiro is the work of such organizations as the GE Foundation. GE partners with both unions and school administrators throughout the U.S. on educational-support programs. Indeed, while such initiatives touch a bureaucratic nerve, foundation-supported programs in schools throughout America continue to show strong, measurable and lasting results.

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