Q. What is the impact of ‘venture’ philanthropy on established organizations including ‘umbrella’ fund institutions such as United Way and Jewish Federations?

A. Venture philanthropy—in this context, as practiced by “giving circles”—is one of the newer buzzwords in the millenia-old field of philanthropy. In certain circumstances, venture philanthropy is used to describe pooled funds—representing the joint philanthropy of like-minded individuals—that behave like foundations. Individuals can join one of these groups by donating a set sum of money (minimums range from $5000 to $100,000+). The group—or individuals who are part of the “circle”–does the research and development needed to determine who will receive the funding. In addition, many of these organizations do not keep any endowment, meaning they give away their total pool each year.

One other unique aspect of this type of venture philanthropy is that the same group of people that donate money to the fund determine the grantees.  Not only is it usually a requirement of joining the fund, but also an assurance that the funds will be re-invested into the local community.

As with organizations like the United Way and Jewish Federations, many individuals say they give to these groups because they feel their money can have a greater impact through this type of donation.

What are the other benefits of participating in this type of venture philanthropy?

  • If you are going to determine where a portion of the total is going, you get involved with the community and really understand the chosen area of funding whether it is in the child-development, educational or faith-based arena.
  • There is a direct connection between funders and beneficiaries.
  • The donations don’t tend to be as program or project driven as many of the larger traditional foundations require for proposals.

In many ways, venture philanthropy relies on the same theory that helped create the ‘umbrella’ fund institutions.  Join smaller donors together for a greater impact. It is a question of how involved you would like to be in the entire process.  United Way and Jewish Federations combine your donation, whether big or small, with others to merge into a greater pool for larger impact.

What, then, is the impact of ‘venture’ philanthropy on established organizations such as Jewish Federations and United Way?

One can only pose a potential theory.

For the sake of this article, it will be called the Beta/VHS theory.  Once upon a time, if you wanted to see a movie, you had to go to a theater or wait for your favorite film to appear on one of the 4 or 5 available television stations.  Then, you had to make sure to be home to watch it.  Yes, one is hard-pressed to remember such a time.

Then came cable television and the proliferation of channels—some even devoted to movies, 24/7.  This was accompanied by Beta and VHS recorders.  The movie industry fought tooth and nail against the new VCR technology.  They thought no one would ever go to a theater again.  If everyone can just tape a movie, they claimed, then, the industry would lose too much money and there would be no return on their investments.  Well, we all know that tale ended with the movie industry eventually joining in the creation of tapes, DVDs, downloads and a multitude of other revenue models.

If we embrace change, and consider the more people that give, even if they buy into a “new model” of joining together, the more philanthropic investment will be available for worthy purposes.  Some will choose to have a voice in each gift and others will simply like the idea that they are uniting and conquering.  Even Warren Buffet decided he was better joining with another to increase the impact of his philanthropy.

The Internet has transformed our ideas about community and has impacted communal giving that meets charitable organizations needs in a multitude of ways.  The key is to show that community giving is the “next” generation of giving.  Follow the example set by the innovators like moveon.org.  Smart United Ways and Jewish Federations have already begun to embrace “giving circles” and “venture philanthropy funds.” The impact can be as positive as the “umbrella” organizations want it to be.