Has Venture Philanthropy Passed Its Peak?

We keep searching for the next new thing—at the expense of the tried-and-true.

As someone with roots in product marketing, I can’t but help to see the similarities between the fashion curve of popular products and the adoption curve of venture philanthropy. And we have, in my opinion, passed the summit of that curve for venture philanthropy.

When we founded Strategic Grant Partners in 2002, partnering with outstanding leaders who have powerful ideas to improve the lives of struggling individuals and families in Massachusetts, the term venture philanthropy was new. You had to explain to people that it referred to taking techniques from venture capital and applying them to achieving philanthropic goals

Today, terms like social investing, social entrepreneurs, and social impact are common. Grants that require measurement and outcomes are ubiquitous. Finding the “new” new thing is the primary occupation of several well-intentioned philanthropies. There has been a dramatic shift in philanthropic dollars to high-risk startups, diverting money away from traditional nonprofit organizations. Even our government thinks of itself as a social investor, using taxpayer dollars to fund higher-risk social ventures through its Social Innovation Fund.

How do you know when you have crossed the top of the fashion curve? Quality wanes dramatically. In fashion, a good example was the downturn of Tommy Hilfiger, an ultra “flash in the pan” brand that was clearly at its end when it showed up at discounters such as Marshalls and Kohl’s and on middle-aged guys who frequented WrestleMania.

In philanthropy, we are seeing a lot of early-stage nonprofits with ideas and leadership that aren’t ready for prime time. Unfortunately, many are getting funded. Some talented and not-so-talented social entrepreneurs are getting hold of sizeable amounts of money to give their idea a go. This trend is reminiscent of the 1999-2000 Internet funding bubble.

Another indication that the end is near is when there are multiple variations of the same idea, or when the ideas themselves are on the periphery or so amorphous that it’s hard to know what the idea is, exactly. The number of tangential education-related nonprofits that claim that they will substantively change educational outcomes for kids is staggering. Many are doing good things for kids, but they don’t have meaningful, measurable impact and are diverting philanthropic dollars from organizations and interventions that have true impact.

Since venture philanthropy firms subsist on finding the next new thing, we continue to feed the beast—a beast that is already well sated. What’s worse, funders have become weary of making grants to existing grantees, feeling they should have become financially sustainable without them.

The good news is that never before have the stronger nonprofits attracted such impressive talent. In the early days, renegade social entrepreneurs like Pat Lawler of Youth Villages or Gerald Chertavian of Year Up were few and far between, and it took them years to attract the kind of talent they needed to scale. Today, the landscape of early and mid-stage nonprofits looks quite different, with experienced mid-career leaders making the shift to nonprofit management and a wave of young business-school types choosing to make their careers in nonprofit ventures. Strong, well-led organizations like Youth Villages, Year Up, and Big Brothers Big Sisters of Massachusetts Bay are proving every day that some nonprofits have what it takes to deliver real impact.

What this means is that when we find something that works, we should stick with it, not move on to the next hot thing. More than stick with it—we should double down on the best of the best, the organizations with great leaders than have actually figured out how to change the world. Making our most successful grantees more successful is one of the best ways we can deploy capital.

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  • Brian Quinn's avatar

    BY Brian Quinn

    ON February 28, 2013 10:43 AM

    Joanna, as the team director for the Robert Wood Johnson Foundation’s Pioneer portfolio, which was created to seek out and support innovation in health and health care, I read your post with obvious interest.

    I too believe that supporting organizations that are having a measurable impact is something that the philanthropic community — in partnership with government and the private sector — should be working to do and it is something that RWJF does by dedicating substantial resources to focus areas like childhood obesity and health care quality or by investing to scale promising models like Playworks.

    Nevertheless, I disagree with the notion that sustaining organizations versus investing in new ideas is an either/or scenario — or that investing in new ideas is a trend comparable to waning fashion icon.

    The Robert Wood Johnson Foundation’s decision to invest in new ideas stems from a sincere belief that there are challenges for which solutions have not been developed and that engaging innovative thinkers from multiple sectors and industries to test out “risky” ideas could unveil those solutions. And while the Pioneer portfolio was only created ten years ago, this belief has always motivated RWJF. For example, we invested in the demonstration projects that led to the national 911 emergency medical response system.

    In fact, I’m confident that the tried and true organizations and leaders that you share in your post were once new ideas themselves, and someone took the chance to see if they could work, for which we should all be grateful.  Social change involves taking risks, and philanthropic organizations are uniquely positioned to look for innovative, unconventional, future-oriented solutions.  These projects should continue to be an important part of a foundation’s grantmaking portfolio.

  • Joanna Jacobson's avatar

    BY Joanna Jacobson

    ON February 28, 2013 05:36 PM

    Completely agree with you and as I said in the post, venture philanthropy firms such as SGP are predicated and subsist on the notion that new ideas are critical and important. I was hoping to only make the additional point that new for the sake of new is not by definition better than some of proven interventions that still need enormous support to scale. An important lesson from my product marketing days is that continual innovation and improvement are necessary to stay relevant and impactful and proven players like Youth Villages and Year UP are committed to continual innovation. SGP will continue to search for and invest in new ideas while we double done on those organizations that continue to deliver results.

    By the way love RWJ work .... we all have a lot to learn from it.

  • Dr Sameerkumar Shah's avatar

    BY Dr Sameerkumar Shah

    ON March 4, 2013 03:40 AM

    excellent article…i am glad to read this. I thank you and your team to promote venture philanthropy

  • BY Jenny North

    ON March 7, 2013 03:27 AM

    Fascinating to read about the differences in the VP context in the US. Over here in the UK there definitely isn’t enough philanthropic money going around to see tons of ‘not-so-talented’ people getting sizeable amounts! Without a doubt some of what is donated (and that includes government grants) isn’t well spent, but we believe this calls for more Venture Philanthropy in this country.

    But your comments about resisting the temptation to chase the next new thing, and doubling down are well-made. After a decade of pioneering VP in the UK, we have the same imperatives at Impetus. To make a transformational, national impact that changes the way people see a formerly intractable social problem you need to get a lot of ideas in the hopper, but as time goes on you need to stick with the ones that work, and be brave and committed when the time comes to turn your little bets into big bets.

    One thing we do have in the UK is a very diverse - and sometimes dislocated - social sector.Without doubt there are people in small communities starting up ‘new’ things’ which duplicate, less successfully, more established initiatives. We don’t want to turn off those people’s passion - but we want to channel it into what works. That’s food for thought - how can all ‘engaged funders’ be more proactive about putting the solutions we have supported into the hands of others?

    Thanks for a great read!

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