How Are Charitable Organizations Learning from Venture Capitalists?

It is common for those who are well-off financially to give to charity. Not only does it provide them with a little tax relief but it also does a good thing for society.

Many charities are learning some strong business lessons from venture capitalists who are major contributors to their causes. This has led to a rise in venture philanthropy.

The Basics of Venture Philanthropy

Venture philanthropy, according to Philanthropy News Digest, is when donators and charities think of charity organizations like a business. It involves a venture capitalist investing in the organization instead of just giving it money to with as it wants. They help the charity with their knowledge to grow stronger.

You could compare this to the old saying that if you give a man a fish that he will eat for a day, but if you teach him to fish, he will eat for life. Venture philanthropy works this same way because donators are not just giving money, they are providing the charity organization with information and injecting it with knowledge that will help it to earn more money in the future.

An example of a venture capitalist taking the venture philanthropy approach is Mark Stevens. While Mr. Stevens invests in many charities, he also goes a step further to get involved in the causes. For example, he created a fund specifically to help the United States Olympic Committee fund technology innovation.

The Inner Workings

Venture philanthropy involves incorporating business actions into the process. Charities will use ideas that include investing and even venture capital techniques. The charity remains focused on its core missions but the approach to getting funding takes a different path than simply asking for donations.

When someone donates to a charity, the money can only go so far. When someone invests in a charity, it creates a more rigorous result where the charity finds ways to be more strategic with its funds to grow them beyond that initial donation.

It is a collaborative approach where the charity relies on help from people outside of its organization to help it raise money and optimize its returns. The basic idea is a donor gives a charity money and teaches the charity how to take that money and get a greater return on it through using traditional methods that businesses use.

It is not about turning charities into businesses, though. This is an important distinction. Again, the charity can keep its focus on its mission and what it wants to accomplish. However, the methods for getting there are a bit different.

Instead of seeking out donor after donor, the charity will seek out quality donors who have something more to offer them. Venture capitalists make an ideal partner in this process because they not only have money to give but also knowledge to share. However, anyone with business knowledge can be a good fit for venture philanthropy.

Benefits of This Approach

The benefits of venture philanthropy become obvious once it starts working within an organization. It leads to more profits because it allows for the growth of funds without requiring more donations.

It also makes it easier for the organization to stay on track and keep moving forward. It creates a momentum of growth that expands the organization’s abilities.

Once a charity starts to see returns, it can increase other donations and help the organization to garner more attention. An organization that is taking off and doing great things will always attract more people to it. Whether this is donors or volunteers, it will help the charity to grow.

In the end, it allows these organizations to make a bigger impact. When donations can grow and the organization does not have to rely solely on people giving because it is earning from past donations, it can do more and make larger strides towards reaching its goals.

Reasons to Do It

A charity organization should at least consider venture philanthropy if for no other reason than the opportunity to greatly increase returns on donations. The struggle of every charity is getting enough funding to achieve its goals. With this type of donation financing, it is possible to turn every donation into three or four times as much.

The Denver Post admits that this process is risky, but when you take risks, you exponentially increase your potential for returns. To carry this off properly, a charity needs to partner with its donors. The donors can offer so much more than money. They can teach organization leaders how to increase their donations through investments and other business-type moves.

Taking the Leap

Venture philanthropy is not an instant process. It takes time to implement and start seeing a return. Despite it taking time, many charity organizations are taking the change on it. They see the potential and believe that this process can change the face of donations and the abilities of their organizations to do more good.

Daniel Bailey is a known content writer from California, USA. He writes content in different niches such as social media marketing, finance, business, etc. He’s a day time blogger and night time reader currently working for some blogs. He enjoys pie, as should all right-thinking people.

How Are Charitable Organizations Learning from Venture Capitalists?

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