Venture Philanthropy

Philanthrocapitalism or venture philanthropy is a branch of philanthropic activity in which venture capital or private equity comes to application in charitable and nonprofit sectors. Venture Philanthropy is a movement, which adopted techniques that had already worked well for venture capital establishments in the 1990s. It is quite a closer interaction between the recipient and the giver, with an emphasis on results that could be measured.

Although venture philanthropy exists in a number of forms, but primarily it is characterized as:

The engagement or active partnership of volunteers, donors and experts with non-profits or charities for achieving mutually agreed results like capacity building, organizational effectiveness and other vital changes. Another characteristic of this kind of philanthropy is the use of different financing methods in addition to grants, like loans, multi-year financing or other financial instruments that are most suitable for the requirements of a nonprofit. Another characteristic is the ability to offer resources and skills with the aim of giving more value to the development of a nonprofit. The drive to empower donors to capitalize socially on their investment, whether the donor is an expertise or time volunteer, or a financial donor.

The modern form of philanthropy first emerged in USA in the middle of 1990s, and it spread out to Europe in the past decade. The venture philanthropists from Europe have adapted and developed the U.S. model to imbibe varying socio-political as well as funding environments. For instance, venture philanthropy in America is based on grants, but in Europe there are broader options of surplus sharing concept and loans, that are used in addition to grants. It has also been found that there is openness in Europe, when it comes to investing in charities that are not registered like social businesses, social enterprises and individuals. The primary reason for this alteration from the American model is the existence of different legal forms of tax relief for charitable organizations in different European countries. In order to advance their mission, venture philanthropists are more likely to work actively with government or funders.

The fact of the rapid growth of venture philanthropy in the last decade apart, it still receives only a small portion of total grants. Even though Venture Philanthropy remains small in size, its impact continues to develop as traditional, larger grant makers take some of its main principles. The key characteristics of venture philanthropy include high engagement, multi-year support, tailored financing, non-financial support, performance measurement and capacity building.

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