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Symposium 2014

Virtual Library File - Venture Philanthropy: Its Evolution and Its Future - Harvard Business Review

The Challenge

Society often rewards philanthropists for giving away their money—think about The Giving Pledge—while scorning those, like hedge funds, who can generate overwhelming financial returns. Turning t ...

Society often rewards philanthropists for giving away their money—think about The Giving Pledge—while scorning those, like hedge funds, who can generate overwhelming financial returns. Turning this equation on its head, and lauding those that take risks to support young but high impact generating businesses will mean changing the nature of how we view capital markets and philanthropy. And this, perhaps, would at last unlock capital for impact investing. Philanthropic capital could be potentially more impactfully spent by providing guarantees against first loss capital to support social enterprises, or through venture debt targeting these businesses. To date, this model barely exists.

This article, while written for the philanthropic sector and interested venture philanthropists, offers a potent view of how the charitable world is evolving to adopt a business mindset. The fusion of business, multi-faceted returns and philanthropic desires echoes the needs of social enterprises and the early days of impact investing—putting impact before profits. This new approach is lauded as being a panacea to development challenges like poverty alleviation, access to energy, and global health, but for practitioners, the picture is less rosy.