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Letter to a Young Venture Philanthropist

Judging from the explosion in popularity of “venture philanthropy” initiatives in local communities, one would be excused for thinking we are in the midst of a renaissance of sorts.

In federation after federation, these new groups are beginning with great fanfare and proceeding, or ending, with decidedly mixed results. One thing is certain, though: They are not all “venture” philanthropy. Just calling it a duck won’t make it quack.

The term “venture philanthropy” gained some initial currency after a 1997 Harvard Business Review article argued that there was much that a philanthropic foundation could learn from venture capitalists. The article was widely discussed at the time, and not all of the comments were glowing.

A great deal of opposition to the notion of venture philanthropy emerged in the foundation world, as well as the not-for-profit community. Many of the principles articulated in the article were abused by the former and criticized by the latter. Still, there is much wisdom to be found in the idea.

So, what should a good venture philanthropist do? One of the greatest market advantages that an independent funder has — whether they have a foundation or not — is the ability to fail. When you are prepared to fail, while fervently hoping to succeed, it means that you are prepared to risk. And when you are prepared to risk you are going to end up funding interesting things.

Some of the most innovative projects in today’s Jewish communities came about because an independent funder or group of funders took a risk on a long shot. A calculated risk, perhaps, but they invested money in a passionate individual with a dream and they were prepared to walk away from that money if it did not work out.

Like the good venture capitalist, they keep a varied portfolio of investments — some blue chips with a certain, though modest, return; some moderately risky but pretty safe bets, and some long shots. Knowing that long shots rarely pay off does not discourage them. They might only need one big win to have a great year. If that means they are going to end up investing in some losers, well, that is the cost of doing business. That is what risk is.

Our venture philanthropist thinks the same way. She wants that one long shot that is going to pay off, that one great idea that is going to change the Jewish world. She is probably going to end up backing some losers in order to find that winner. That is the cost of doing venture philanthropy.

I attended a meeting of foundation professionals several years ago and the topic of discussion was “grants that failed.” As we went around the room describing our setbacks, one young pro, new to the field, delighted in asserting that he had a perfect track record — no failures. The moderator cautioned him not to be too proud of that record. In a foundation the size of the one at which he was working, no failures probably meant too low of a tolerance for risk. A good philanthropist ought to tolerate failure, at worst, and celebrate and learn from it, at best.

The are other characteristics of the venture philanthropist as well — a willingness to bring more than a checkbook to the table, for one; an insistence on measurables, for another. Venture philanthropy has its applications and misapplications. It is an approach that naturally favors certain not-for-profits and has limited application to others.

But one thing is certain: It is not just about getting a group of young people together to make small or mid-sized grants to a range of local institutions. It does not become venture philanthropy simply by calling it venture philanthropy.

If we want to change the world, or our little piece of it, we are going to have to take some chances. Aspiring venture philanthropists who are assessing their appetite for risk would do well to consider the New York Lottery’s sage advice to skeptical ticket-buyers: “Hey, you never know.”

Mark Charendoff is president of the Jewish Funders Network.

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