05/28/2013 05:16 pm ET Updated Jul 28, 2013

Putting the "Venture" Back into Venture Philanthropy

This past week I spent two days in Venice - my first visit to this legendary Italian city. I had been invited to speak at the European Venture Philanthropy Association (EVPA) that has the good sense to hold its annual meeting in Venice. No wonder the EVPA keeps growing, and its yearly get together convenes almost 100% of its members.

The EVPA secretariat had asked me to participate as a "provocateur" - in my case, as one who operates within the entrepreneurial ecosystem but not in the venture philanthropy corner of that ecosystem. I was to contribute my perspectives on the evolving entrepreneurial scene across the world, provide some predictions on the future of entrepreneurial endeavors, and what might be EVPA's role in that changing context.

In preparing for my provocateur role, I reflected on when the term "venture philanthropy" first emerged - or more accurately - when I first heard the term, which was around 2000, when I started heading up the Schwab Foundation for Social Entrepreneurship. The idea was meant to capture the notion of a pro-active form of philanthropy unlike the kind, till then conventional, wherein well-meaning individuals and foundations wrote checks to a worthy cause - but stayed at arms length from the cause and the charitable organization receiving the money. This "new" type of philanthropy mirrored the participatory approach of venture capitalism as applied instead to the achievement of social goals, using grant-making and other forms of investment. Such investment was accompanied by a time commitment on the part of the donor/investment entity which , through active involvement in the venture itself, contributed experience and talent (usually from the commercial sector) to build the management and governance of the grantee organization, ensuring its longer term sustainability and impact.

Certainly in Europe, the practice of venture philanthropy that is emerging is heartening. Many of the leaders of these organizations are former investment bankers or venture capitalists themselves who have found a new and exciting way of deploying their know how.

So while there are many positive elements that European venture philanthropists have borrowed from practice in the commercial world, (I am less familiar with how the practice is evolving outside Europe) they have also inherited what to me has been one of the most noteworthy characteristics of venture capitalists: an aversion to risk. This might seem like an odd statement to make, given that the entire VC practice is based on taking risk. Well... yes... and no. VC's participate pro-actively in management matters precisely to contain risk and assure returns, and are naturally most comfortable investing in enterprises where like-minded parties also are investing.

Of course, such conservative behavior seems sensible, given that so many ventures fail - and VCs have investors to think about who are expecting to get financial returns.

But venture philanthropy should not march to the VC drummer in this regard. Given the challenges we face today, we need courageous philanthropists who are ready to take a gamble on supporting disruptive or radical innovations - those that hold the promise to transform our existing systems and practices into new ones that are more sustainable, accessible, and empowering. Venture philanthropy, by its very nature, is better placed than any other "investment" actor, to step into this vacuum. By its nature, it is the epitome of risk capital. It is not as constrained as commercial investors or the nascent "impact investing" crowd - who must deliver a financial return. Nor is it like governments which tend to back already proven winners and resist disruptive innovations where those threaten to shake up the status quo and upset vested interests that keep ruling parties in power. It thus is often unlikely that the source of funds for radical innovation for the social good will in fact be from the public sector.

So who will fund disruptive innovators whose approaches the world so desperately needs? What I can observe is that venture philanthropists, similar to their venture capital counterparts, are seeking entrepreneurs who have attained proof of concept and typically have garnered already the support of other funders. And many of those entrepreneurs are embarked upon incremental innovation - not of the disruptive sort. So what happens to those who are pursuing a massively disrupting innovation but have not yet reached that point? Unfortunately, most wither unless they personally have 'angel investor' connections with deep enough pockets to back what they are doing.

I think of the various 'near-death' experiences of Marc Koska, a UK entrepreneur who made it his life work to come up with the auto-disabling syringe. He was galvanized by the fact that in countries around the world, particularly in poor communities, health care workers reuse syringes on multiple patients, some of whom carry life-threatening diseases. That practice kills 1.3 million people a year. Marc has dedicated 25 years of his life to transform this systems failure, inventing and manufacturing the K1 auto-disabling syringe. It looks like a normal syringe, but after the plunger has been pushed all the way down once, it locks and breaks. Marc went at this task alone. To support himself and his family, he perfected the art of filling the gaps in the wooden floorboards of old English houses. Meanwhile, he studied everything he could about syringe design and manufacture. He met huge resistance from Ministries of Health and the commercial companies that produce and sell millions of "normal" syringes. It hasn't until very late in the process that Marc has had overwhelming success (see Many would have given up by then.

Other disrupting innovations come from within companies, spearheaded by "intrapreneurs" and their teams. Nick Hughes and his colleagues working at Vodafone spring to mind. When the executives of the company were less enthusiastic about the socially-motivated innovation proposed, Nick secured a Challenge Grant from DfID and serendipitously during the pilot, ended up creating what is now M-Pesa, a systems-changing mobile phone innovation in Kenya that delivers money instantly and securely between mobile phone users. Mobile money has since become a key contributor to development in African communities where mobiles are ubiquitous and many people don't have - or want - bank accounts. (

Koska and Hughes and his colleagues are the sorts of entrepreneurs that venture philanthropists need to find ways to back from the outset. In Koska's case, he spent an inordinate amount of time and energy convincing others to financially and politically back his efforts. How many lives could have been spared if he had garnered financial support sooner? In Hughes and his team's case, how ironic that he had to seek support from outside the company to spearhead what became a revolutionary social and economic innovation, plus a business bonanza.

Let's put the "venture" back into venture philanthropy. Let's deploy philanthropy more where its greatest comparative advantage lies - in tolerating the highest risks where the stakes are great. The world has never needed it more.