The Insider's Guide to Grantmaking: How Foundations Find, Fund, and Manage Effective Programs

Philanthropy as Social Venture Capital

An article that appeared in the Harvard Business Review (Letts, Ryan, and Grossman, 1997) has sparked a great deal of discussion about a distinctive way of understanding foundation philanthropy. “Virtuous Capital: What Foundations Can Learn from Venture Capitalists” advances the thesis that philanthropy should be perceived as social venture capital, somewhat analogous to commercial venture capital. Under the traditional philanthropic model, say the authors, a foundation makes a grant based on the efficacy of a program, in the hope of making that program a model that can be eventually brought to scale. The “venture philanthropy” approach, by contrast, operates on principles borrowed from the marketplace. ...