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Is the Kaufman Foundation using its resources appropriately?

Am I alone in thinking that what is going on at the Kauffman Foundation is extremely odd?  According to a current article in Forbes Magazine,the foundation is redirecting its philanthropic resources to support of venture capital start-ups.  Equally odd, in my view, is the Forbes article itself, which focuses on the power struggle and Schramm’s supposed quest for “efficiency,” rather than on the appropriate use of philanthropic resources.

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  • Yes! It really is odd— and, to be very honest, really seems simply out of the realm of philanthropy altogether. On the one hand, there has been interesting debate about foundations talking out of one side of their mouths about supporting social change and through their grantmaking supporting nonprofits in progressive fields of work while at the same time placing the investment of their endowments in some pretty scarey stuff. But in this case, it seems to be actually using the grantmaking budget of the foundation to invest in VC activities. Isn’t there already plenty of VC money out there?! Internationally there are some similar trends—where “nonprofit” organizations are claiming to further local economic development in poor or marginalized communities when in fact all they really are doing is serving as on-the-ground pipeline/due diligence arms for international investors looking for opportunities to make a quick buck off the backs of “third world” markets. Not to be bitter about it, but it really does an injustice to the efforts organizations like mine—NESsT (http://www.nesst.org)—are doing to apply “business-like” investment strategies to support the development of nonprofit organizations. The social enterprises we support face many of the same challenges of their for-profit peers and require many of the same types of capacity-building and technical support to succeed, but there is never any question that these enterprises are tied to a nonprofit, public-benefit purpose. Shouldn’t a foundation like Kauffman, that has been such a leader in promoting entrepreneurship, take a more philanthropic approach to its philanthropy?

  • BY Chad Smith

    ON June 23, 2004 08:20 PM

    I don’t find it odd, I find it refreshing.  A foundation devoted to entrepreneurism should help promote it - and it seems that Schramm is putting money where there is a dislocation in the traditional channels of entrepreurial funding ($100,000 and less initial capital grants). 

    If indeed they are counting their VC investments as their 5% payout, then I think they will have a hard time justifying a public benefit to the IRS.  But the 5% is small potatoes compared to the rest.  Schramm can continue funding the questionably impactful educational programs that the Kauffman Foundation has done in the past with the 5%.  Aligning their asset base (the other 95%) around their mission would have much more of an impact, and is something that way too few foundations do.

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