Harvard Business School recently published a paper titled “Venture Philanthropy: Its Evolution and its Future”. Written by Allen Grossman, Sarah Appleby and Caitlin Reimers, the paper explores the current state of venture philanthropy (VP) in the US and its future. The findings of the paper are based on interviews with 28 practitioners in the field of philanthropy.
Besides addressing what can be done to increase results-driven philanthropy, the paper also discusses the significant impact VP has had on the non-profit sector despite its small size relative to philanthropic giving. The paper highlights the set of practices that have been proven effective in scaling evidence-based service delivery organisations. It seeks to provoke people to objectively ask themselves if their means of giving are as effective as VP, and if not, how they can embrace some or all of its practices. Allen Grossman, Senior Fellow and Professor of Management Practice at Harvard Business School (Retired), has worked extensively on the challenges of creating high performing nonprofit organisations. His current research is focused on leading and governing high performing nonprofit organisations and the leadership and management of public school districts. Allen spoke to AVPN News about the key findings of the paper:
Your research suggests that venture philanthropy has had an outsized impact on the nonprofit sector. What impact has it achieved?
VP represents a tiny, tiny fraction of philanthropic giving to service delivery organizations in the US. Data supports that organisations funded by VP scaled much more successfully than their counterparts who tried to mobilise traditional philanthropy. While size is not necessarily a proxy for effectiveness, the key condition of VP grant-making is proven effectiveness. It is difficult to therefore make a case that these organisations have not had an outsized impact in the communities they serve.
Why has it had an outsized impact?
This goes to the heart of why VP is important. At its core is a focused and well articulated strategy to fund effective organisations over relatively long periods of time and to expect certain milestones to be achieved. When we asked for the focused strategy of non-VP donors, very few could articulate a coherent approach to expanding their impact to the ultimate beneficiaries. Also, at its core, VP holds nonprofits accountable for measurable results. This helps drive nonprofit CEOs to focus on their organisation’s effectiveness. After extensive research, we have been unable to identify a high performing sector or system that does not have at its core measurable outcomes and positive consequences for attaining these outcomes.
What were some of the other key findings of the research?
VP as a practice works to spread effective programs. Few, if any donors, we researched or interviewed had developed alternative theories for effectively spreading programs. Since the original idea of VP was introduced over a decade ago, there has been some shift to more accountability at every level in the philanthropic sector, but, despite current rhetoric, little has changed. Many grants are relationship driven and data still plays too small a role in philanthropic decision-making.
Based on your findings, how do you think VP growth can be promoted?
We must be apostles, constantly calling for more money to flow to what works. Giving is a personal expression, but there is also a responsibility to ensure that dollars are spent in the most effective fashion. That need is compounded by the fact that grants in many countries receive special tax consideration. We must continuously call the question about effectiveness, and provide the necessary support and knowledge to help donors improve their outcomes. If there are other mechanisms for successfully funding the spread of proven programs, we should advocate them as well. We are not promoting VP as much as trying to improve the impact of philanthropy.
What are some challenges for venture philanthropy?
It is hard work and requires a focus that runs contrary to always looking for the newest idea. It is for many a lot less attractive to help an established organisation grow than to continuously fund the latest “hot” idea. While we always need funding for innovation and experimentation, the compelling challenge in the social sector is the inability of well-managed, effective organisations to reach all the beneficiaries who need their service. Philanthropy is a capital market and, by logic, money should flow to the most successful organisations. Today, that is not usually what happens. We need to build a case that better functioning philanthropic capital markets can actually make a difference in solving social problems. There is ample evidence to support that claim.
To read the full paper, please access our website’s resource centre.