What role does venture philanthropy play?
Taking on risks that private venture capital funds and public markets would not take
Venture philanthropy (“VP”), a model where a non-profit mission drives an organisation to make investments to advance this mission and use the returns that are reinvested towards the mission. VP poses as a an alternative to traditional finance like venture capital or the public markets where such investments are deemed risky or expected returns are too low for the given risk.
An example of a leading VP is the Cystic Fibrosis Foundation (CFF). A charity initially set up to fund research at universities to treat cystic fibrosis. Yet, CFF engaged in a maverick move where it used its donations to invest in drug trials to treat the disease (such as Kalydeco)[1]. The returns generated from this successful drug via CFF selling the royalties of this sale were reinvested in other drug trials. Inevitably, this created a virtuous cycle to support the non profit mission.
It is very possible that we can use the example of CFF on investing in an eco system to support members of a vulnerable community to start and grow businesses whereby the returns are reinvested to advance this mission. Examples of what type of investments such an ecosystem can involve can be found in this Table of this most recent post
[1] https://ccl.yale.edu/sites/default/files/files/MIT%20-%20The%20New%20Venture%20Philanthropy%20-%20A%20Case%20Study%20of%20the%20Cystic%20Fibrosis%20Foundation%2C%20Lo%20et%20al.pdf