Venture Philanthropy

B L Razdan
“One should strongly resent miserliness and indulge in charity because one can acquire the never-ending wealth of immortality by doing so.”   -The Rig Veda
“A man’s ingress into the world is naked and bare; his progress through the world is trouble and care. And lastly, his egress out of the world, is nobody knows where. If we do well here, we shall do well there. I can tell you no more if I preach a whole year”.  – John Edwin
During his last hours on his deathbed, Alexander told his generals, “After my death when you put my body in the casket, let my arms dangle over the edges with my palms wide open, so the public see my empty hands while I am leaving the world”. The generals did as was told. Many dignitaries who came to the funeral were surprised to see his arms out of the casket with his palms wide open. Upon enquiring they were told “Alexander wanted to show that when he ruled the World, great treasures of gold, silver and wealth came to be under his possession, yet indeed he is leaving the World empty handed”  (Writing of JC Pinkerton)
Most of us have read about what Alexander, the great had realized that his conquests, his great army, his sharp sword and the treasures of wealth he had accumulated during his entire life were of no use, and he had to leave all of these things behind him in this World. Yet when it comes to ourselves, we generally refuse to learn the lesson implicit in it. The reality of this life is that we come to this World empty handed and will leave this World empty handed. Verily, the wisest person is he who prepares himself for the life after death by obeying the Creator’s commands in best of manners as we all return to God after we die. Always remember the only things that go with us after death are our deeds.
In the world we live, success is measured in terms of the material wealth we acquire; our greed for riches being proof enough that the actions of a large majority of us are self-serving. Yet success is not an end in itself as many of us seem to believe. According to Ralph Waldo Emerson, however, “To laugh often and much, to win the respect of intelligent people  and affection of children; to earn the appreciation of honest critics and endure the betrayal of false friends; to appreciate beauty, to find the best in others; to leave the world a bit better, whether by a healthy child a garden patch or redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded.”
It is also gratifying that there are many people around the world, who in their own ways – big or small – have kept giving throughout their lives without expecting anything in return. Many a business titan, be he Warren Buffet, David Rockfeller Jr, Chuck Feeney, Bill Gates, Dorab Tata or Azim  Premji, to name a few, however, have taken giving to a whole new level and stand out for their magnanimity in giving away the bulk of their wealth for the betterment of the society.
India being the oldest surviving civilization has had the tradition of both charity and its own kind of venture philanthropy. While Vedas and Purans eulogize charity no end, the organized business had evolved an identical concept known as “dharmada”, which involved levying of a small surcharge on every business transaction and pooling these petty levies in a separate account known by the same name. The collections in this separate account would invariably be spent on charity.
Venture philanthropy (VP for short) in modern parlance, is one tool in the social investment and philanthropy toolkit, the goal being to improve the quality of life of the less advantaged people. It provides a blend of performance-based development finance and professional services to social purpose organisations in helping them expand their social impact.  This is a high-engagement, partnership approach analogous to the practices of venture capital in building the commercial value of companies. It works to build stronger social purpose organisations by providing them with both financial and non-financial support in order to increase their societal impact.
The term ‘venture philanthropy’ was first coined in 1969 by John D. Rockefeller III who used it to describe ‘an adventurous approach to funding unpopular social causes’ in USA. The way in which the first venture philanthropists sought to transform the charitable sector alienated many of those they were trying to help. The main elements of venture philanthropy – building operating capacity, close engagement between donors and recipients, and clear performance expectations – were said to be long-standing features of the best philanthropy and not new at all.
When the term resurfaced in the mid 1990s, it was associated with a growing community of dotcom millionaires who were seeking to apply both their wealth and their business acumen to the most pressing social or societal problems. In its modern form, venture philanthropy developed significantly in the US in the mid 1990s, took hold in the UK from 2002 and is now expanding into continental Europe. While the initial excitement and controversy which surrounded venture philanthropy in the US in the mid 1990s has subsided, the movement continues to develop both in North America and in Europe – where it plays an important role in diversifying capital markets for non-profit and social-purpose organisations. The field is gradually maturing and with it a particular set of skills and methods are being developed which have important ramifications for traditional grant making and grant receiving organisations. As VP spreads globally, specific practices may be adapted to local conditions, yet it maintains a set of widely accepted key characteristics, which are a kind of sine quo non for all such organizations.
As is true of all other new ideas, venture philanthropy too has its fair share of sceptics, yet there is no doubt that it has the potential to contribute to developing a more responsive and diverse capital market for the social sector. Its focus on building organisational capacity in entrepreneurial social purpose organisations, matching appropriate finance with strategic business-like advice, makes it a distinctive provider of capital.
Since the beginning of the decade venture philanthropy has played an important role in diversifying capital markets for social purpose organisations and reaffirming some key principles for good grant making. In particular they have filled a gap between traditional grants for non profits and commercial market rate equity and loans. Capital investments made by venture philanthropists also aim to address issues of sustainability and scale.
In Europe, it has emerged during the present decade as a high engagement approach to social investment and grant making across a range of organisations with a societal purpose (SPOs), from charities and non-profit organisations through to socially driven businesses. Social investment refers to funding that may generate a financial return, but where the societal impact comes first; so-called Impact First strategies. Grant funding on the other hand is the provision of non-repayable donations to the social purpose organization supported; an “Impact Only” strategy.
Venture philanthropy is characterized by:
*Willingness to experiment and “try new approaches”.
* Focus on measurable results: donors and grantees assess progress based on mutually determined benchmarks.
* Readiness to shift funds between organizations and goals based on tracking those measurable results.
* Giving financial, intellectual, and human capital.
* Funding on a multi-year basis – typically a minimum of 3 years, on average 5-7 years.
*  Focus on capacity building, instead of programs or general operating expenses.
* High involvement by donors with their grantees. For example, some donors will take positions on the boards of the non-profits they fund.
Building on the success of the European Venture Philanthropy Association, which has more than 140 members in 20 countries in Europe, field building activities are being undertaken in Asia. The Asian Venture Philanthropy Network (AVPN) is busy growing the venture philanthropy community across the Asia Pacific region. How I wish that the Network is dominated by Indian tycoons!

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