Over the course of the last few decades, nothing has defined the way new technology companies grow and spread their coverage to an international market quite as much as the activity of the venture capitalists who provide their backing. Without a combination of large angel investors and financial firms managing later rounds of additional investment support, it would be nearly impossible for an innovation in services or hardware to spread globally with any kind of speed. Capital makes it possible to attract all the talent you need, and to provide the best resources for research and development. Of course, VCs get into this kind of investment for the return, and while backing startups can be risky, it has paid dividends for tech professionals that allow them to turn around and put their money to work in the industry, to incubate more innovation.
It’s not hard to see how that model has allowed many of the industry’s longstanding participants to develop the kind of capital that allows them to think beyond the industry. Like previous generations of industrialists in the United States, many of them decide to put their millions or even billions to work through philanthropy, supporting the charitable causes and cultural institutions that they value. It’s also not surprising that these VCs often bring with them ideas about how to scale services and do more with their donations. That’s what has led to today’s strong trend toward venture philanthropy.
What Makes Venture Philanthropy Different
Traditional philanthropy typically involved providing patronage to established institutions on an ongoing basis. Often, individual high net worth families would support a handful of causes ranging from museums and orchestras to social services and employment placement. Sometimes, these institutions also provided grants to smaller nonprofits, but it wasn’t always the case. Occasionally, traditional philanthropy involved forming a foundation to distribute grants and support to a variety of causes on a need-based application process, and the growth of those foundations was key to the eventual development of venture philanthropy.
When an investor establishes a philanthropic venture that is designed to combine socially responsible income-earning investments with grants for research, social services, and cultural institutions, you enter the territory of venture philanthropy. Incubating new products and technologies that can be delivered to market to improve people’s lives provides the profit needed for the foundation to invest in totally nonprofit activities like scholarships and grants sponsoring NGOs and nonprofits around the world. Venture philanthropists like Mark Stevens carefully screen investments to be sure the new tech they develop is in line with their mission, so they often focus on B corporation certified operations and ideas with large implications in medicine, energy, and sustainable resource management.
Investing in Change From the Ground Up
This combined, market-based approach by philanthropic ventures has the benefit of nurturing change from the very beginning, supporting innovation and social growth at every stage of its development. Grants to nonprofits often include provisions for supporting educational initiatives that are related to the organization’s overall philanthropic goals, as well as support for students pursuing research-based degrees and funding for the projects that stem from them. Sometimes, the focus of these grants is based on the home town or state of the founders, but just as often it is a global program meant to pursue the most promising innovation while providing support for traditionally marginalized voices seeking access to education and opportunity in the field.
This dual approach provides a wider pool of talent to the very industries that are creating the solutions to problems like global climate change, sustainable energy, and unequal access to social resources. In many cases, these firms even provide pathways to raising cultural consciousness by finding the markets and distribution methods that bring traditional forms of art and music to new audiences, enriching the present with the past even as they incubate the future.
Famous Examples of Successful Venture Philanthropy
One of the earliest examples of this kind of organization to become well-known is the Bill & Melinda Gates Foundation, whose focus on educational innovation has helped incubate technologically advanced classrooms across the country. With programs that support both in-class innovation for traditional classes and school-wide changes like the establishment of magnet STEM programming, its initiatives often provide crucial gap funding for school districts that want to provide more tech education but lack the space in their budget to make equipment investments and training possible.
Today, Schmidt Futures, an organization run by former Google CEO Eric Schmidt is providing support for solutions to the current COVID-19 pandemic, among other major social and technological initiatives. With more and more tech professionals turning into entrepreneurs and then venture investment specialists, there’s a very good chance that venture philanthropy will grow into the dominant form of giving for wealthy individuals. Its goal of making self-sustaining investments alongside charitable contributions certainly gives the structure of this kind of organization staying power.