Sunday, December 31, 2006

Venture Philanthropy

The new focus on strategic thinking and return on donations is embraced in a new vision of philanthropy called venture, or high engagement philanthropy with the basic concept outlined in this article.

The concept of social capital, balanced with economic capital is also connected and together indicates a maturing social investor perspective congruent with an increasing sophistication in economic investments.

Philanthropies learning lessons from business
By James Surowiecki -
Published 12:00 am PST Sunday, December 31, 2006

James Surowiecki is the financial columnist at the New Yorker and the author of The Wisdom of Crowds. This article appeared in Technology Review, an MIT enterprise.


As the names of the Carnegie, Ford, and Rockefeller Foundations suggest, American philanthropy has always depended heavily on American businessmen.

But with some exceptions -- like the Carnegie libraries, or the Salvation Army, which Peter Drucker once called "the most effective organization in the United States" -- the fact that foundations were mostly funded by business did not mean they were businesslike in their approach.

Over the last decade or so, that has changed dramatically. Beginning sometime in the mid-1990s, two trends came together to remake philanthropy in the United States: the tremendous boom in the U.S. economy and stock market, and a growing desire on the part of wealthy businesspeople to apply their moneymaking techniques to other, less commercial endeavors.

The economic boom meant a lot more money floating around: Charitable donations in the United States rose 10 percent annually in the late 1990s. It also meant a lot of newly wealthy people, many of them entrepreneurs, who were interested in figuring out how to spend that money in the smartest way possible.

The result has been an explosion in new forms of philanthropic investment and a concentrated effort to identify what might be thought of as the philanthropic equivalent of business opportunities: areas where neither business nor government has been meeting a need.

Although the growth in charitable donations slowed with the stock-market crash and recession, it's picked up again, with donations rising about 23 percent between 2001 and 2005.