Many wealthy business leaders and individuals believe that giving back to the community is part of their overall mission as catalysts for societal change. The definition of “venture philanthropy” zeroes in on the investor’s role in supporting a social purpose organization to maximize its impact in the world.
Nitin Bhatnagar of Dubai, UAE, an innovative venture philanthropist, breaks down the concepts of venture philanthropy, examining how this practice can help the world overcome social, economic, and political difficulties.
What is Venture Philanthropy?
In the past, large-scale donors to nonprofit organizations tended to provide bulk cash donations and allow the nonprofits to handle their own administration, resource allocation, and program delivery. Venture philanthropy represents a change in attitude where the donors are more involved in the daily operations of the nonprofits themselves.
Venture philanthropy focuses on a long-term approach to supporting local and national nonprofit organizations. The two core processes of supporting deserving nonprofit organizations include:
- Tailored Financing
Nonprofits frequently cannot afford or qualify for traditional methods of debt service. This funding is instead provided by venture philanthropists. Equity, loan, grant, and hybrid financial instruments provide much-needed cash infusions to these deserving organizations.
The specific type of funding offered to each institution is limited by the investor’s willingness to assume risk as well as the company’s business model and developmental stage.
- Non-Financial Support
Financial help is not the only source of assistance provided by venture philanthropists. In addition to directly funding their efforts, venture philanthropists provide important support and training services to their chosen organizations. These services may include revenue strategy, compiling a theory of change, business planning, fundraising, much more.
Frequently, an established company’s personnel are better equipped to handle a nonprofit’s business concerns than are the volunteers that make up the backbone of its workforce. The venture philanthropist donor can make a huge difference without contributing to the company’s budget.
Investors for Impact
Business and individual investors that are focused on making nonprofits succeed are known as “investors for impact.” These investors have specific characteristics in common:
- Exhibiting a long-term engagement with the nonprofit
- Retaining a problem-focused and solutions-oriented attitude
- Letting the beneficiaries take center stage
- Managing social impact
- Taking risks in favor of the nonprofit
- Enhancing collaboration
- Encouraging the wise use of resources
- Providing an extensive non-financial support
- Providing tailored grant opportunities
Investors For Impact vs. Investors With Impact
There are two types of nonprofit investors that can help organizations realize their goals. These investors are “investors for impact” and “investors with impact.”
“Investors for impact” follow the Venture Philanthropy model. While other nonprofit investors are financially beneficial to the mission of the organization, they may not be fully aligned with the Venture Philanthropy philosophy.
The primary difference between investors for impact and investors with impact is that investors for impact are concerned with producing innovative solutions. They do not necessarily have large outlays of financial and human resources available to them, but they are highly dedicated to making sure the mission of the nonprofit is successful.
Investors with impact, like Nitin Bhatnagar from Dubai, believe that financial returns need to be guaranteed when the new organization succeeds. They are more likely to go for proven solutions or viable business models. Finally, they already have large resource pools from which to draw in order to support their proteges.
Venture philanthropists frequently take on global roles in helping nonprofit organizations meet their goals. They are particularly involved in developing countries where nonprofits get fewer individual donations and have a more difficult time retaining successful track records.
How to Get Involved
People and companies that are already involved in venture capital may find it easiest to supplement their for-profit enterprises with venture philanthropy projects. Donors must have large cash reserves and excellent relationships with banks and lenders. They must be able to provide hands-on help and support to the organizations they wish to support.
Begin by searching for an organization you are passionate about. Many venture philanthropists choose to support organizations that are concerned with effecting social and economic change as well as promoting small businesses in developing countries. Others are more concerned with health issues like access to medical care and clean water.
Nitin Bhatnagar of Dubai recommends that you study the organization’s inner workings to see whether you feel they could be improved through a venture philanthropy approach. Together with the organization’s leaders, brainstorm about how your expertise could help them become more effective and organized.
Venture Philanthropy Works
Venture philanthropy is a growing field because it works. Organizations like the Robin Hood Foundation, the Cystic Fibrosis Foundation, and Tipping Point Community have benefited from a venture philanthropy approach to supporting their missions.
Nitin Bhatnagar of Dubai suggests that if your company wants to become involved in venture philanthropy, it pays to do your research. Understanding venture philanthropy can create the ideal situation both for your company and the nonprofit who is benefiting from your funding and expertise.