Venture philanthropy is often compared to impact investing. While the two are similar, venture philanthropy precedes the new investment trend. The term was coined in 1969 by John D Rockefeller III in a speech before the US congressional committee.
In defending the tax benefits of philanthropy, Rockefeller argued that it played a massive role in helping society solve some social problems that governments could not address. He believed that philanthropy should support the exploration of new areas, take calculated risks, and identify emerging needs in society. In essence, philanthropy should act as venture capital for tackling societal issues.
Fast forward a few decades, and the need for venture philanthropy still persists. This insight explores venture philanthropy, why it’s important for family offices and how they can navigate the space for success.
What is venture philanthropy?
Venture philanthropy involves using traditional venture capital principles to support philanthropic initiatives. In other words, it approaches charitable giving from the lens of a professional investor. Typically, venture capitalists search for start-ups and rigorously conduct due diligence before finally investing to maximise financial returns. Venture philanthropists, on the other hand, select organisations with similar rigour. However, their primary concern is how much social impact the organisation will have in the future.