|This article relies largely or entirely upon a single source. (September 2011)|
Characteristics of venture philanthropy
Venture philanthropy is characterized by:
- Willingness to experiment and "try new approaches".
- Focus on measurable results: donors and grantees assess progress based on mutually determined benchmarks.
- Readiness to shift funds between organizations and goals based on tracking those measurable results.
- Giving financial, intellectual, and human capital.
- Funding on a multi-year basis – typically a minimum of 3 years, on average 5–7 years.
- Focus on capacity building, instead of programs or general operating expenses.
- High involvement by donors with their grantees. For example, some donors will take positions on the boards of the non-profits they fund.
There are three models for engaging in venture philanthropy. The first is traditional foundations practicing high-engagement grantmaking. The second is organizations which are funded by individuals, but all engagement is done by professional staff. The third is the partnership model, in which partner investors both donate the financial capital and engage with the grantees. Most of these are pass-through funds, i.e. they do not have an endowment, but rather grant all the money they are given annually.
The Centre for Effective Altruism spun off a venture philanthropy project in 2014, called Effective Altruism Ventures. Other examples of this type of venture philanthropy are the Robin Hood Foundation in New York City, Tipping Point Community in the San Francisco Bay Area, The Research Acceleration and Innovation Network (TRAIN) initiative from FasterCures, the Asian Venture Philanthropy Network (AVPN), and the European Venture Philanthropy Association (EVPA).
In the late 1990s the Bethesda-based Cystic Fibrosis Foundation, encouraged by their then-President Robert Beall, invested in a small California biotechnology firm to help fund the development of Kalydeco. The treatment now costs more than $300,000 a year per patient.
"We are aware of the financial complexities of the huge expenses for R & D with respect to the small number of patients or the market system that enables these advances to become reality. Yet -- notwithstanding all your patient support programs -- it is at best unseemly for Vertex to charge our patients’ insurance plans (including strapped state medical assistance plans), $294,000 annually for two pills a day (a 10-fold increase in a typical patient's total drug costs). This action could appear to be leveraging pain and suffering into huge financial gain for speculators, some of whom were your top executives who reportedly made millions of dollars in a single day (Boston Globe, May 29)."—David M. Orenstein, MD et al.
- Forbes via NBC News 'Venture philanthropy' is new buzz in business: Buffett, Gates not the only tycoons reshaping world of charitable giving
- Venture philanthropy gains steam, pushes promising science through to patients
- Brady Dennis (2 July 2015), Are risks worth the rewards when nonprofits act like venture capitalists?, Washington Post, retrieved 19 July 2015
- David M. Orenstein, Paul M. Quinton, Brian P. O'Sullivan, Carlos E. Milla, Mark Pian et al. (9 July 2012), Letter to Jeff Leiden, CEO of Vertex Pharmaceuticals (PDF), retrieved 19 July 2015
- Effective Altruism Ventures
- CNET Universities and industry: A marriage of convenience
- Kirsch Foundation Definition of Venture Philanthropy
- EVPA's Definition of Venture Philanthropy
- The Foundation for Advanced Philanthropy Advanced Concepts
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