Venture Philanthropy: the evolution of high engagement philanthropy in Europe

'Venture Philanthropy: the evolution of high engagement philanthropy in Europe' By Rob John, June 2006Venture philanthropy provides a blend of performance-based development finance and professional services to social purpose organisations in helping them expand their social impact.  This is a high-engagement, partnership approach analogous to the practices of venture capital in building the commercial value of companies.In its modern form, venture philanthropy developed significantly in the US in the mid 1990s, took hold in the UK from 2002 and is now expanding into continental Europe.Although not without its sceptics, venture philanthropy has the potential to contribute to developing a more responsive and diverse capital market for the social sector.  Its focus on building organisational capacity in entrepreneurial social purpose organisations, matching appropriate finance with strategic business-like advice, makes it a distinctive provider of capital.Venture philanthropy in Europe has strong links to the private equity and venture capital community, giving it opportunities to influence the corporate social responsibility of a set of major players in Europe's financial services industry.  Several new venture philanthropy funds have been established by philanthropists with successful careers in private equity.Europe's transitional countries, in Central and Eastern Europe, the Baltic States and former Soviet Union, have under-capacitated social sectors and widespread, unmet social needs.  Venture philanthropy may have a particularly valuable role to play in helping build stronger civil society institutions in these countries.As a relatively young industry, venture philanthropy faces many challenges in communicating and marketing what it does; developing a menu of financial instruments and advisory services; measuring performance and social impact; collaborating with complementary capital providers such as foundations.This working paper is the first in a series which explores the expansion of high engagement philanthropy in Europe.On November 8 the Skoll Centre for Social Entrepreneurship at Oxford University’s Saïd Business School launches Dr Rob John’s paper Venture Philanthropy: the evolution of high engagement philanthropy in Europe.Unlike lots of charitable giving, venture philanthropy (VP) invests in core capabilities and growth, with the aim of scaling the impact of social purpose organisations – charities and non-profits, but also social enterprises and ethical firms.The term venture philanthropy was probably first coined in 1969 by the American philanthropist, John D Rockefeller III, in a hearing before the US congressional committee leading to the Tax Reform Act.  Rockefeller had in mind an adventurous approach to funding unpopular social causes. However, a more literal application of business principles to VP among US dot-com philanthropists in the 1990s provoked as much criticism as admiration.  This paper surveys a newly emerging landscape, discussing the ways VP principles have been adapted to local conditions in Western Europe and among accession countries. It highlights key issues for the future.As such, it suggests:                               A European tradition can be discerned which is more pluralistic than that of the early US pioneers with the use of a wider range of financial instruments and performance management strategies;                                European VPs tend to have worked more closely with traditional charitable foundations, co-investing, learning from one another and influencing each others’ practice. Impact and growth may be as likely to come from changes in mainstream foundations, as from the expansion of VP funds;                                The evolution of European VP has been closely allied to the European Venture Capital (VC) sector. As a result, VP is well placed to provide a synergistic model for corporate social responsibility in VC and private equity firms – again, offering distinctive prospects for growth.The movement is still nascent, and total funds in VP are currently small. But these characteristics suggest the prospects for venture philanthropy to become a significant sector in Europe are good, and its ability to influence wider reform robust.Venture Philanthropy: the evolution of high engagement philanthropy in Europe is a working paper from the Skoll Centre for Social Entrepreneurship’s research programme on social capital markets. Copies may be obtained from www.sbs.ox.ac.uk/Skoll/research. Other papers in the series aim to:                               Map the international social capital landscape and inform the agenda for research and innovation;                                Examine ways we may conceptualise social capital markets, and their consequences;                                Described the strategies social entrepreneurs use to manipulate legal structures and facilitate access to capital.Social capital markets also provided the theme for the 2006 Skoll World Forum on Social Entrepreneurship in March with contributions from Al Gore, former US Vice President, and Muhammad Yunus, founder of the Grameen Bank and recent winner of the Nobel Peace Prize for his work in pioneering microfinance. For coverage, see: www.sbs.ox.ac.uk/Skoll. To download this paper, click here