Disruptive grant making is to traditional philanthropy as Uber is to the taxi industry – a challenge to the old order. The philanthropic world – and foundations especially – move at a slower pace than the rest of the world. Grant making is hidebound.The appeals come in exponentially and the grants go out arithmetically. Power rests with the grant maker.
Social impact philanthropy, also called venture philanthropy or venture partnering, is becoming more common but is still a small part of the picture. The idea is simple: a business commits to serving the public good, first by making a profit, and then by distributing that profit to charities. The idea has been around awhile and was pioneered by Ben & Jerry’s. It is catching on now as younger (and sometimes older) philanthropists seek an alternative to in-and-out grant making. “B” corporations are a hybrid organizational form now available in many states.
It’s hard to rock two babies: profit v. social good. Regardless, disruptive grant making is here to stay; the decision for a new or merging family foundation is first, whether it will consider social impact philanthropy as a funding tranche and second, to what extent. Starting any business involves risk, risk tolerance, determination, patience, knowhow and sure management.
Earlier this week I invited Brian Jones, founder and CEO of Kin Travel to talk with my graduate students about his plans for developing holistic and sustainable travel options primarily for the rapidly growing Millennial generation. Brian sees huge market potential. But he is eschewing the traditional venture capital firms (interested only in quick returns and control of the enterprise) and is seeking $8 million of “patient” capital from social impact investors to set up a prototype small hotel, here or abroad. I have his deal book and would be happy to send it on to anyone interested.
For a new or emerging family foundation social impact investing might be an opportunity as a modest addition to, not a replacement for, other asset classes in the investment portfolio – keeping in mind a high risk, a long wait and a non-traditional idea. But for a grant maker given to supporting eco and environmental causes the efficacy of an outright grant against an equivalent investment in disruptive philanthropy should perhaps be an agenda item at an early board meeting.
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