What is Venture Philanthropy?

By Sofia Marie-Mascia                     

In last week’s blog, I talked about identification mechanisms that aid investors and benefactors in selecting which conscious companies to invest in. Human rights abuses in particular often stem from a lack of commitment to ethical practices across supply chains. A factory that illegally employs children cannot operate unless a business is buying what it produces. If these actors are identified, investors have a better chance of choosing to support only ethical enterprises.                     

But what is the role of existing philanthropic organizations in stemming abuses? The EVPA (European Venture Philanthropy Association) describes venture philanthropy as matching the soul of philanthropy with the spirit of investing. This idea was conceived by the Harvard Business Review 1997 when private equity investors found that a new approach was needed to maximize the potential of charities to solve social problems. The EVPA founded shortly thereafter and in collaboration with the European Commission, and its 25 member countries have begun to lead the charge of transforming social enterprise with the Venture Philanthropy structure.                       

Unlike other mechanisms of charitable giving, venture philanthropy is divided into three core practices that ensure long-term impact. The first is tailored financing in the form of grants, debt, and equity hybrid financing. The second is organizational support that improves structures and processes rather than just providing easy cash flow. The third is impact measurement. Research is conducted to measure if impact tailored financing and organisational support made a difference. Venture philanthropists then use the information to ensure more positive outcomes in the future.

The EVPA monitors and communicates European Union developments of relevance to the Venture philanthropy and social investment sector. In future case studies, we will see how their model below has begun to empower the powerless and drive change with capital.