History of Charitable Giving
Alms giving to charity to venture philanthropy. Thats been the path traveled over the past 100 years in the United States.
Until the early 1900s, charity meant alms giving. Individuals gave money directly to poor people or helped them with food and clothing. There were no organized charitable funding organizations.
The entrepreneurs of the Industrial Age had substantial resources and were changing the face of the world. These individuals wanted to change the social system as well; they had "big" thoughts and ideas. They moved from alms giving to charity. Through charitable initiatives, they attacked social problems and established foundations to fund library systems, build museums and hospitals, and address other social ills. They established foundations such as the Ford Foundation, Kellogg Foundation and Carnegie Foundation.
In the late 1990s, another seismic shift began. A whole new group of individuals had accumulated great wealth. These successful people knew the power of technology to shape issues and to bring new ideas into play quickly and efficiently. Whether Larry Ellison, Bill Gates, Pierre Omidyar or Jeff Skoll, they decided to invest significant portions of their technology-based personal wealth to tackle social problems.
Some of these new philanthropists developed and are implementing what has become known as a "venture philanthropy" or "social entrepreneurship" model of giving. They were well aware of the important role played by venture capitalists in nurturing new technology-based organization. They saw that venture capitalists (VCs), rather than private investors, drive business development. They knew from personal experience that VCs make a financial commitment, and also:
- Participate in developing a management team,
- Help set strategic direction through Board membership, and
- Seek measurable results.
It has been on this model that "venture philanthropy" is based.
Venture philanthropy is:
- Active engagement by donors in the charity, whether through participating on the Board of Directors, volunteering on-site at the organization, and/or encouraging others to support the cause or organization.
- Focused financial commitment. This is often a multi-year commitment with expectations that specified results will be obtained or the support will lapse.
- Focused on solving a social problem, not treating the symptoms. Too many times, according to the new philanthropists, traditional charities focus on "giving a person a fish rather than teaching that person to fish." Venture philanthropists support organizations that are working to change to the self-sufficiency model.
- Driven by identifying measurable outcomes and holding charities to meeting those outcomes.
You can also read about Venture Philanthropy: The New Model.
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