Venture philanthropy: What is it and How can it Benefit Social Entrepreneurs
IT COULDN’T BE CLEARER! Our society needs a new and innovative model to tackle societal issues. Social enterprises however, often lack stable funding and the capacity to build partnerships to take on their ever-increasing challenges. A crucial element in tackling societal issues is implementing business models promoting innovative and sustainable initiatives in the medium and long term. Therefore, it becomes fundamental to provide adequate support, both financial and not, to social and young entrepreneurship.
This is where venture philanthropy comes in.
Venture philanthropy is one of the most effective tools in social investment and the philanthropy toolkit. Venture philanthropy adopts an investment methodology that aspires to promote social, environmental and cultural change, without forgetting the financial returns deriving from the investment itself. In other words, the aim of venture philanthropy is matching the soul of philanthropy with the spirit of investment, resulting in a high engagement and a long term approach to creating social impact.
How does it work?
Check the graph below… it is easier than with words…
The difference between financial and non-financial support
● FINANCIAL SUPPORT
Venture philanthropy organizations or social investors find the most suitable financial instrument to support a social purpose organisation, choosing from the range of financial instruments available: grant, debt, equity, and hybrid financial instruments. Choosing the right financial instruments depends on the risk, return and impact profile of the investors, and on the needs and characteristics of the enterprises.
● NON-FINANCIAL SUPPORT
Non-financial support doesn't include a direct transfer of money but includes a number of services such as training courses, tutoring and mentoring, which allow entrepreneurs to acquire the skills necessary to ensure the sustainability of the business independently, and in the long run. Therefore, non-financial support is aimed at achieving three main goals: financial sustainability, organizational flexibility, autonomous decision-making capacity and social impact. Many social entrepreneurs actually prefer to receive non-financial support rather than grants because, in this way, they acquire a greater awareness of their business.
Have a look at these organizations:
- The European Venture Philanthropy Association (EVPA) Since the launch in 2004, EVPA has been building a community of organisations interested in or practising Venture Philanthropy and Social Investment across Europe.
- Venture Philanthropy Partners (VPP) VPP is an American organization with an innovative approach that consists of four key components: partner identification, engagement, investment, and advising.
- The Asian Venture Philanthropy Network (AVPN) AVPN is a unique funders’ network based in Singapore committed to building a vibrant and high impact social investment community across Asia.
Can social inventors and venture philanthropy help me?
The answer is YES!
Venture philanthropy's main goal is to help create and grow stronger and more sustainable social enterprises. So, if you are looking for a grant to implement or grow your business idea, venture philanthropy could help you. Venture philanthropy is a relatively new concept but it’s impact is immense. See it as an opportunity to consider if you want to realize your dream of building your business with a knowledgable support system at your back.
Check out this example of a company with a social mission that evolved through the Venture Philanthropy model?
Siedlisko is a social enterprise located in Poland running a nursing home that provides full-time, high-quality care for seniors and people with chronic illnesses. It also delivers catering and laundry services to local companies, individuals and public institutions. The social enterprise trains and employs youth with intellectual disabilities and long-term unemployed people to be caregivers of the residents, as well as teaching them to operate the catering and laundry services.
For the past three years, Siedlisko has received grants from a venture philanthropy project to invest in equipment and infrastructure to expand its operations, as well as business assistance to identify new business opportunities and generate more sales. To date, Siedlisko has improved the lives of more than 300 marginalized individuals.
Photo credits: PxHere