Venture philanthropy (VP) is an approach to charitable giving that applies venture capital investment principles – such as long-term investment and capacity-building support – to the voluntary and community sector. It is a form of ‘engaged’ philanthropy.
Modern forms of VP emerged in the USA in the mid-1990s, and spread to Europe about five years ago. However, the very first modern VP organisation is arguably the Phyllis Trust (now known as Andrews Charitable Trust), set up in 1965 by Briton Cecil Jackson-Cole. The Trust played an important role in the creation and growth of a number of charities, including Oxfam, ActionAid and Help the Aged.
UK and other European venture philanthropists have adapted and evolved the American model to reflect differing socio-political and funding environments. For example, most American venture philanthropy is grant-based, whereas in Europe there is a broader spectrum of financing, such as loans and surplus sharing mechanisms, often used in combination with grants. Europeans also typically are more open to investing in initiatives that are not registered charities – such as social enterprises, social businesses or individuals – in part stemming from the varying legal forms of organisation and charitable tax relief in different countries. European VPs also are more likely to actively seek to work in partnership with other funders or government to advance their mission.
Despite its rapid growth over the last 10 years, VP still remains a small percentage of total grant-making, even in the USA. Venture Philanthropy Partners found that – compared to the 50,200 charitable foundations in the USA making a total of $27.6 billion in grants in 2000 (Foundation Center) – in 2001 there were only 42 “high-engagement” VP organisations, together making grants of about $50m, less than 0.2% of total foundation grant-making.
Yet whilst VP remains limited in size, its influence continues to grow as larger, ‘traditional’ grant-makers adopt some of its key principles. According to the European Venture Philanthropy Association, the key characteristics of European venture philanthropy are:
- High engagement
- Tailored financing
- Multi-year support
- Non-financial support
- Organisational capacity-building
- Performance measurement