Doing Good: The New Venture Philanthropy Model

"So you say you want a revolution..."
      -- The Beatles

In previous posts, I have discussed how entrepreneurs are making a difference in philanthropy. This approach is very similar to how venture capitalists approach early-stage investments. I also want to point out that you don't have to be Bill Gates to get involved. Everyone from the MBA to the Java programmer to the CEO can have an impact. It has a number of components:

1) People, People, People: if you have a day job, it is unlikely that you will be running the cause, just like VC's enable but don't run businesses. Successful companies and non-profits are willed into existence, usually by the vision, charisma and passion of the founder. Insight, connections, resilience/tenacity ability to execute and vision drive success. Before you invest your money or time, make certain you are backing the right person/people. More importantly, once you have found someone, your job is to enable and facilitate their vision without getting in their shorts. Find out what resources they need and what challenges they face. Define what success is upfront (milestones), help as you can and step back. Do your homework on the issue and space so you can knowledgably interact with management. Too many funders have little understanding of the battlefield and force the Executive Directors to spend a lot of management time managing their board, giving presentations and running down blind alleys. In other words, once they have given their money, these funders actually suck value out of the organization.

2) Sweat Equity: Your time is more important than your money. As with a VC, if you just bring money, it is helpful, but suboptimal. You have connections, experiences and resources. Once you have found an organization to support, find out what road blocks or short falls (beyond just money) that it needs. Spend time to learn more about the issue. Study other historical approaches, efforts and organizations that are involved. What worked & what didn't. Visit and see in the field how services are provided. This is like coming up to speed on a new deal. You are only as helpful to the organization as you are knowledgable. No armchair quarterbacks. Lastly, find a cause or problem that you have a personal passion around. Like a start-up, this is a marathon, not a sprint. The impediments and challenges are much worse than in the tech world. Passion will help you manage burn out and set backs.

3) Milestones & Measurement: "I don't know where I'm going, but I'm making great time." Too often in philanthropy, there is no sense of what success means. Often the goals are admirable but too lofty...feed the poor, improve education, etc. Don't spend your time or money unless it is clear what you are trying to achieve. The Food Depository is great with this...how many families & meals served. Resources are scarce. This sector is dramatically under-funded (and always will be). Like a start-up, you need to be capital efficient. Know what you get versus what you give. A boot-strapping entrepreneur doesn't just throw money blindly at a marketing campaign and neither should a cash starved non-profit.

4) Patience: the other side of #5 below. These issues have been around forever and will continue to be around. As with a start-up, it takes years and many different approaches to reach your goal. Failure should be expected. Learn from it, adapt and push forward. Set expectations and time frames accordingly.

5) Experiment: one of the key success traits of a start up is that it fails quickly and iterates. Burn as little capital as possible going down a dead-end. Pilot, measure, fail/succeed and iterate. Try new approaches and models. Irving Harris, one of the great Early Childhood philanthropy pioneers, used to seed pilots to address Early Childhood issues. He would measure them and if successful, would migrate it over to a full blown, state/federally funded program. The non-profit world holds onto its failed efforts way to long and there is a significant not-invented-here issue.

6) Small bites: these problems are massive. They can vacuum up enormous amounts of capital in the blink of an eye. Start with an effort whose scale is appropriate for the time and money that you have. Make the difference in a single person's life, learn and then scale. Mother Theresa started by feeding a handful of people on the streets and scaled from there. Effective start-ups pilot with an initial customer or two, learn what works and applies that learning to the next pilot. You need to know what you are trying to achieve and how to measure success. Tutoring a student, mentoring a graduate, helping a person find a job, adopting a family, adopting a class room are all examples. This means anyone, regardless of income or status can make an impact. Again, it is your time that is key.

Like ants making an ant hill, each one only carries a few grains each time, but as a group, they make a significant impact. This is the case with philanthropy. Everyone can make moderate impacts on a modest scale, but it will all add up.

Comments

[mcsteen]

Matt-

I love your series on philanthropy. I am a big fan of giving back and making an impact.

I was wondering what your thoughts were about political contributions and whether they might be considered philanthropic.

For example, my wife and I have just recently (the past 2yrs) been giving money to candidates that we think will have an impact on some of the social programs we believe are beneficial to society.

Do you think giving to politicians in order to save social programs is philanthropic? Do you think it has a greater or lesser impact.

If we give candiate A financial support because we believe he/she will keep a beneficial program, (that feeds the poor, or educates the masses, etc.)
does that have a greater impact? (say we give <$5000 in hopes of retaining a program that is worth $500,000)

Is this a wise investment or a good way of supporting positive social change? You do mention that some of these social problems are very large and complex. Do you think supporting gov't officials has an impact on these social problems?

Just wondering?

peace-
mpm

[mbmccall]

Good question. I co-chair the IVCA Legislative Committee and spend a lot of time dealing with PAC's, Springfield and the political process. I believe that you should support those candidates whose positions are close to your own. It takes a lot of money to move the needle on the political front (and to many candidates). Again, I think your time is more valuable than your money. You can spend it (and your money) on the operating side with non-profits out in the trenches. Or, you can spend it on the political process which would include fundraising for candidates, encouraging certain legislation, etc. The latter has an impact on the macro arena (making the former/micro stuff more likely to succeed).

My role model, Irving Harris, did both (but had considerable resources to do so). He helped launch innovative programs and then active lobbied for favorable legislation (like Head Start) to support them.

I would find an area you are passionate about and get involved on both fronts. Find the best operators in the field running non-profits. They will likely have active lobbying activities (or industry groups) going that you could assist.