Venture philanthropy grew out of a desire to maximise the impact of funding given to charities. In the 1990s there was a growing school of thought that the most common form of funding given to charities - grants for particular projects - did not result in the greatest long-term social impact, as it didn't allow charities with great models to invest in their infrastructure and so expand sustainably.
People started to look for solutions to this problem, and they turned to venture capital because of the track record of this sector in growing companies.
A seminal article appeared in the Harvard Business Review in 1997, called: "Virtuous Capital: What Foundations Can Learn from Venture Capital," by academics Christine Letts, William Dyer and Allen Grossman. In this article it was argued that grant-makers did not place enough importance on building the capacity of the organisations they funded, as most funding went to projects. The writers explored the idea of adapting the venture capital model to the not-for-profit sector.
In addition, it was proposed that rather than just giving funding, there could be huge benefits from a more integrated approach. This would include providing tailored expertise and management support, alongside core funding, to help a charity reach specific growth targets.
Impetus Trust: Ten Years of Excellence
After more than ten years of successfully using the venture philanthropy model to scale up best in class charities, Stephen Dawson and Nat Sloane, co-founders of Impetus Trust, reflect on the process that led to the beginning of the first venture philanthropy organisation in the UK.
These ideas were taken on board by a number of individuals, and this new 'venture philanthropy' approach and in the late 1990s a few US organisations began to put it into practice.
It quickly proved to be successful approach, and the movement spread to other countries. Impetus Trust was founded in 2002, as the first venture philanthropy organisation in the UK.
The venture philanthropy movement continues to grow, and in 2004 the European Venture Philanthropy Association was founded, with Impetus as a founding member.
Read more about how Impetus uses venture philanthropy to accelerate the growth of innovative charities and social enterprises, and the lives that have been turned around by the organisations we support.
Founder of Arbor Ventures and Impetus donor