STATE BEHIND IN VENTURE PHILANTHROPY
By Doris Rubenstein, PDP Services
CityBusiness, July 31, 2000
Creative minds in new-economy businesses in Texas,
California, Virginia and other parts of the U.S. are putting their ideas and their money
together to experiment with innovative ways of bringing about social change. The concept
is called "venture philanthropy", but there are few signs of it in Minnesota at
present.
Minnesota has been a leader in traditional business
philanthropy, with companies like General Mills, Target, and 3M leading the way in support
of the arts and culture, education, social services, etc. The fact is, though, that the
New Economy businesses are not following that lead. It may be that New Economy executives
are looking for a different way of performing philanthropy, and they just haven’t
found it yet. Could venture philanthropy be the answer?
What is venture philanthropy anyway?
According to the June 1, 2000 issue of The Chronicle of
Philanthropy, venture philanthropy is a "movement that seeks to apply some of the
techniques of venture capitalism to the non-profit world." Some of these techniques,
as outlined in a defining paper published in the March-April, 1997 issue of the Harvard
Business Review ("Virtuous Capital: What Foundations Can Learn from Venture
Capitalists") are:
- Taking risks with careful management
- Creating performance measures for long-term outcomes
- Developing close relationships between the donor (venture
philanthropist) and the non-profit (investee) organization
- Commitment to long-term funding of initiatives
- Commitment to major funding for initiatives and
organizational infrastructure
- Identification of exit strategy for the venture
philanthropist.
Who are some of these venture
philanthropists and what are they doing?
Mario Morino, a retired software executive
in Reston, VA, has founded the Morino Institute there. The Morino Institute describes
itself as "both catalyst
and facilitator to help individuals,
institutions and communities understand opportunities and risks presented by the Internet.
It supports and collaborates with other organizations to enhance their own effectiveness;
it also incubates and launches new initiatives." Recognizing that the information age
is quickly making old-economy skills obsolete, and that technology in and of itself is not
a solution for all of today’s problems, the Morino Institute seeks ways to make
networked interactive communications technology an enabling tool for social change.
Minnesota professionals in the field of
venture capital (venture capitalists, investment bankers, corporate leaders, eg.) can take
a lesson from their counter-parts in Silicon Valley who joined forces and funds to form
the Entrepreneurs’ Foundation. The Entrepreneurs’ Foundation, as its mission
statement declares, seeks to inject philanthropy into the corporate culture of Silicon
Valley and to make the community stronger "by applying venture capital principles to
scale-up successful non-profit organizations."
Why do they feel that this is necessary? Do
successful non-profits really need to be scaled up?
Professionals and active volunteers and
donors to non-profits have long known that the demands on their organizations, especially
those in the health and social-service areas, have grown rapidly, despite the
unprecedented growth of the economy and generally-perceived prosperity of most Americans.
This is as true in Minnesota as in the rest of the country.
A recent report by Community Wealth
Ventures for the Morino Institute confirms and explains the pressures on non-profits. As
reported Chronicle of Philanthropy, "Their work, which once supplemented
government efforts, has now in many cases taken the place of government. In fact,
they’ve become their community’s principal service provider for many human
needs. However, resources have not increased in proportion to their increased
responsibility."
Just as for-profit venture capitalists
don’t invest in companies with long histories of profitability, the
Entrepreneurs’ Fund does not support major, established charities. For Minnesota, it
means that main-line arts and education institutions should not bank on getting support
from a venture philanthropy fund, regardless of how innovative the specific program might
be.
On the other hand, newer groups with a
track record that want to try something new to improve or expand their existing program
would be prime candidates for venture philanthropy. But they might be surprised to have a
member of the venture philanthropy group express interest in becoming a part of their
board as a condition of the grant. For the non-profit, this is not business as usual and
may or may not be allowed, depending on their by-laws.
Another take on venture philanthropy is the
developing area of social entrepreneurism. Social entrepreneurism has two faces:
Businesses that engage in socially-responsible business practices; and non-profit
organizations that operate profit-making enterprises to fund and further their exempt
activities. Taken in the context of social entrepreneurship, the enterprise may be
involved in new economy activities, often with a technology orientation.
Minnesotans interested in social
entrepreneurism have a leading resource at close hand, the Eden Prairie-based Institute
for Social Entrepreneurs offers information and sponsors conferences on subjects in the
field. The Northland Institute, based in the Minnetonka, assists entrepreneural
non-profits in their missions as well as training and support for social entrepreneurs.
Venture philanthropy and social
entrepreneurism are characterized by risk. For those who find their profits too dear to be
subjected to risk even when given charitably, they can still follow the path of
responsible and strategic individual or business support to non-profits.
It’s time for Minnesota to stop our slide in
philanthropy ratings, try some new techniques, and regain our reputation for business
innovation and generosity. |
