According to Social Venture Partners, venture philanthropy means "funding organizations that support enterprising nonprofits and social entrepreneurs with not only financial resources, but also management and technical support as well. This support is focused on enabling nonprofits to build greater organizational capacity and infrastructure via long term, engaged relationships with investees."
The Center for Venture Philanthropy identifies five key elements to venture philanthropy:
- A managing partner relationship.
- Investments in long-term (3-6 years) business plans.
- An accountability-for-results process.
- Provision of cash and expertise.
- An exit strategy.
Venture Philanthropy Partners asserts that venture philanthropy efforts often share the following characteristics:
- They provide not only financial resources but also management assistance and other resources that for-profit executives have come to rely upon.
- They feature relationships between the grantmaker and nonprofit partner that are more of an active, involved partnership than solely a funding relationship.
- Their grants cover a longer time period than do typical foundation grants.
- They focus on helping to build and strengthen organizations of their nonprofit partners, not on the development of new programs.
- They help their nonprofit partners establish and track outcomes, and use this information as a basis for assessing the progress of their investments.
While the relationship between the venture philanthropist and the nonprofit is not typically structured as a partnership, it is possible that the relationship will be characterized as a partnership. Accordingly, the venture philanthropist that seeks to assert significant control over the management and operation of the nonprofit should first consider its exposure to liability and risk-tolerance. This may be one important consideration for those who structure the venture philanthropist itself as a nonprofit corporation described by IRC 501(c)(3).