by Susan Paige
Non-profits face many challenges in their efforts to address society’s most pressing needs. Many of the organizational and structural challenges of non-profits stem from their traditional relationships with the foundations that fund them. Non-profit leaders and workers are often frustrated at the inability for their programs to achieve their goals. Many programs with high potential often fall short. The limited impact of non-profits is mostly due to the way their funding foundations design their grants.
For the foundation, program efficacy is high priority, they design grants that put the bulk of attention and funds on the end product. As a result, many valuable causes are unable to be addressed, many programs unable to sustain. Non-profits and foundations must adapt their traditional relationship to a more effective model; non-profits need the space to build a sustainable infrastructure and foundations need to value and fund these efforts.
Venture philanthropy is a strategy for creating sustainable infrastructures and programs for philanthropic organizations. Spearheaded by big name venture capitalists such as, Chris Sacca the approach incorporates elements of venture capitalism into the structure of non-profits. The strategy has been a valuable tool for many contemporary non-profits working to fight climate change, structural racism, and poverty.
Nonprofits and Foundation Funding: The Traditional Approach
Foundations are the main source of funding for non-profits. The traditional attitude of the foundation is to focus on the mission at all costs; they view organizational capacity as a distraction to powering results. In turn, non-profits have run off of disorganized staff, lack of solid infrastructure, and lack of resources. No one has invested in the non-profit, only their goals and mission.
Traditionally grants are designed with restrictions on how the granted money can be spent. Foundations normally break funding down into three main stages: development of a program, early assessment of results, and fundraising to gain additional support. The focus is short-term. This leaves the non-profit with scarce resources for using their time to set up sustainable models that can have long lasting implementation plans. Additionally, the relationship fostered between foundations and non-profits is not founded on partnership but rather oversight. Rather than taking a partnering role, grant providers provides the occasional check-ins rather than insight and guidance.
Venture Capitalists and Startups: A Closer Look
Venture capital investment projects inherently focus on the long-term. Venture capital financing includes money, expertise, and assistance given by investors to start ups and new businesses that have long-term growth potential. Venture capital investors are typically people that have accrued a large wealth base, but can also be investment banks, venture capital funds, and other financial institutions. The key to venture capital success is its holistic approach to success-the value given is not solely in monetary form.
The high-risk nature of these investments causes investors to be actively involved in the success of these projects. Venture capital investors are partners, rather than overseers. Investors often supplement their large financial investments with guidance on critical decisions implementing infrastructure, and mentoring team members. Venture capital investors have long lasting relationships with their startups and are key players in their success. They take the time to develop a deep understanding of the complex organizational needs.
Venture philanthropy looks to incorporate some of the strategies of venture capital projects into the structure of philanthropic and non-profit organizations. Non-profits that utilize this approach often look for guidance from successful entrepreneurs and implement business like strategies into their infrastructure. Bringing venture capitalists on board provides an essential resource.
This strategy looks to adapt the traditional relationship between non-profits and foundations to a more sustainable and successful model. In this approach, the foundation and non-profit develop a partnership based on understanding and addressing structural needs. Rather than have a large and overwhelming intended goal, non-profits would design a series of smaller goals to be assessed over longer periods of time.
Charity Water: A Venture Philanthropy Success Story
In 2007, Scott Harrison was trying to figure out the strategies for taking his non-profit to the next level of success and outreach. In efforts to understand branding and business strategies, Harrison reached out to some of the world’s most successful entrepreneurs and venture capitalists for input. Chris Sacca, as well as many other entrepreneurs, became a vital sounding board of strategy for Harrison. This eclectic group of entrepreneurs came to the table with more than just funding; they provided Harrison with their time and talents. These valuable mentors advised Harrison on how to create a great product and develop an organized infrastructure. Fast-forward to 2019 and Charity Water is one of the most acclaimed and successful non-profits in the U.S.
Pressing social issues deserve the holistic efforts needed to create sustainable solutions. Non-profits have historically acted as societies valiant fighters of social change; however, they need the space to develop structure and funds to develop a productive infrastructure. Employing venture capital strategies is a great tool for non-profit leaders-there are many advantages to employing a business mind.