How to think Like a VC: 5 Ways to Elevate Your Corporate Philanthropy
How social impact and corporate philanthropy leaders can make a lasting strategic impact by thinking like venture capitalists. Corporate Philanthropists and Venture Capitalists have more in common than you’d think.
I often discuss my goals and approach to community investments with my good friend who’s a managing partner of a venture firm. And contrary to what you might think, I’ve found we operate in very similar ways.
Over the past couple decades, I’ve watched industry after industry adopt business strategies to disrupt their markets, innovate and evolve. And that got me thinking: Why can’t corporate philanthropists do the same?
If we adopt a VCs approach to corporate philanthropy, I believe we’ll empower ourselves to focus more on the outcomes we want to create and make more meaningful change in our communities — and the world.
Here are five ways to start thinking like a VC in corporate philanthropy:
VCs look for disrupters in a market and ask, “What’s the opportunity?” They invest to solve big problems, trigger paradigm shifts and ultimately cash in on enormous reward.
VCs don’t give continuous handouts, they invest big up-front — offering funds, expertise and connections to promising start-ups who can deliver on their goals and achieve success over time. If we approach corporate philanthropy the same way, I think we’ll ignite a more active, engaging process that’s focused on the outcomes we want to achieve.
Like a VC, I look for non-profit partners who are aiming to solve big problems to make long-term systematic change. Imagine if our entire industry approached our work in this way? We’d move from charity to change — transactions to transformation and make the lasting impact we’re all striving for.
2. Invest in People Who Know Their Market and Communities
When VCs cut checks, they’re not funding one-off projects — they’re banking on bold leaders who know their market and are on a mission.
Like a VC, I look for nonprofit leaders who align to our Foundation’s goals and are driven to solve big problems for the people they serve. They know their market and ideally, come from the communities we’re targeting for change.
As I thought about how I could be more disruptive in our grant-making process, I wondered, “What would a VC do?”
Rather than sticking to the status quo of inviting nonprofits to fill out lengthy grant applications, we’re testing a new approach: We’re partnering with leaders hitting home runs in related areas, leaders who are members of the communities they serve and leaders with strong ties to communities we want to better understand and serve.
Like startups, nonprofits struggle to attract funding. It isn’t easy to land a government grant without showing a proof of concept. This is where corporate philanthropists can step in help get an idea off the ground — by adopting the concept of seed funding.
Seed money is what VCs use to plant startups firmly on their feet. It’s enough funding to help teams get established, focus on their work and achieve self-sustainability. It’s also used to build interest and attract more investors. The more investors, the better chance a start-up has to achieve its goals, and the more risk is mitigated for everyone involved.
VCs bring more than financial support when they invest in an organization. They get involved, providing expertise and access to their huge networks of business contacts.
Our experience, talent and connections are among the greatest value we have to offer. When I’m deciding on a grant for a nonprofit, I always look for ways we can connect the partner with resources to help them build capacity and achieve our mutual goals.
5. Diversify Your Portfolio
VCs accept significant risk because of the potential for equally significant financial return. They mitigate that risk by funding a collection of start-ups, each capable of hitting a home run.
When I started the shift to thinking like a VC, I tried to reduce the number of non-profits we engage with through the grant application process — and focus instead on capable leaders. With this approach, I believe we’re more likely to reach our goals, build pathways to further collaboration, and make meaningful change in our communities and the world.
Thanks for reading and reach out if you have questions or further ideas. Let’s start a conversation and build the change we want to see!