The notion of applying commercial concepts towards charitable goals is old news. Many of today’s large non-profit organisations already display remarkable corporate savvy, apparent in their annual reports, corporate communications and operations management. These organisations, well-oiled and rich as they may seem, are often backed by one or several wealthy philanthropists; a luxury so defining to non-profit organisations but yet largely unavailable to small and medium start-ups.

Questions on funding are almost customary with social entrepreneurs, many of whom are challenged with maintaining sustained support, monetary or otherwise. One-off donations are common but are they an ideal source of principle funding? -- A question posed at “Social Conversation for Venture Philanthropy”, a seminar organised by the Lien Centre for Social Innovation at Singapore Management University (SMU).

Venture philanthropy is a concept derived from venture capital, where investments are put into start-ups that show strong potential for growth. Venture capitalists not only provide capital but also intellectual, managerial and technical expertise. Such a concept would eschew one-time, one-off grants, in favour of a long-term relationship with the investor/donor. Targets are tracked and measured, based on which funds are dispersed.

Simple as it may sound, many of today’s non-profit organisations do not benefit from such long term donor-grantee relationships. Instead, they busy themselves with various short term gains.

Building a business case for Non-profit organisations

According to Gillian Koh, senior research fellow at the Institute of Policy Studies and a panellist at the seminar, there is a lack of know-how within the sector. “If you want a good product, you need a good factory. With a good product, you can attract more funding. Ultimately if you want to tell a good story to attract the grant makers, you need the capabilities,” she said.

Furthermore, non-profit organisations need to assess their own competencies – whether they have the capacity to plan and strategise. “The idea is to apply the business smarts and capital to the outfit that seeks to do social good,” Koh added.

Through the concept of venture philanthropy, however, organisational capabilities can potentially be enhanced, as donors share both their wealth and expertise. Social Venture Partners (SVP) International, a Seattle-based venture philanthropy group, has come up with a model that helps to promote donor education programmes.

SVPI has a vast network of donors who donate a minimum of US$5,000 annually. They get to decide on a common area of interest, after which, they devote their time and share their knowledge with the non-profit organisation. Ruth Jones, executive director of SVP International, describes this network as one that is ready to invest in building and supporting the long-term capacity rather than short-term projects or programmes. Not only do the partners chip-in with cash, they also contribute their talent. And the investment pool is spent each year.

There are ten capacity-building areas by which SVPI seeks to tackle, for instance: Does the organisation have good governance? Does it need to expand its board to bring in a wider range of skills and expertise? Does it have evaluation tools and resources to evaluate its programmes? “We can’t stay with the organisation forever,” said Jones, remarking that between three to five years is the average. She is confident that within this time, the organisation would have built a sustained and strong structure to attract funding from a range of sources.

Cash donations and grants are straightforward, non-committal means of exercising charity. Clearly, more can be done. To attract sustained funding, however, non-profit organisations should try to engage with their donors. This could mean providing donors with additional avenues to contribute more. “It is as important for the donors to learn and understand the non-profit sector and social issues, as it is for them to give and volunteer,” explained Jones. A better understanding helps donors and partners align their values with their giving. Simply put, allow donors to give more and they could actually end up giving more.

A shift in the perception

Meanwhile, a newer generation of potential donors are bringing with them new mindsets, possibly effecting changes in the way philanthropy is conducted. Notions of community projects and charity come easily with younger generations, raised in environments where caring for the environment and the disadvantaged has only become increasingly fashionable.

“I don’t think passive donations are suitable for the younger generation,” said Gerard Ee, board member of the Lien centre, during the same event. “The younger generation will want to see where the money has gone to, how it is being used and the outcomes that have been achieved.”

A sense of self-accomplishment is important, and active participation will allow donors to feel that. “The donor gets a part to play and as a result, finds greater satisfaction from investing in a company. They also get to see how their money helps the company grow and adds value to the organisation,” he added. However noble all of this may seem on the part of the donors, it presents new challenges for the non-profit organisation – How will they cope with the enthusiastic, interfering donor?  

The active participation of donors may be tricky for non-profit organisations not used to the “intrusion”. “This is not passive giving, so it may not suit people who are not committed to give their time and energy to it,” Jones said. As most donors hold full-time jobs, meetings can only be scheduled during their free time, after work or on weekends, via the phone or through emails, once or twice a week. Ee believes non-profit organisations need to adjust their mindset and take a big step from their comfort zones onto unfamiliar terrains. As such, it may take a while before they are ready for it. For now, non-profit organisations need to educate themselves for the change.

“Meanwhile, what we can do is to act as a catalyst to cause the change to happen among donors and potential recipients,” said Ee.