January 16 2017 0Comment

How Venture Philanthropy Can Help Your University Get the Funding (and the Programs) It Needs

Writing in 2012 for the American Association of University Professors, Kevin Kumashiro voices a concern that still resonates for many academics, the fear that venture philanthropy is bound to introduce programs “framed by corporate profitability.” This fear that the private sector only becomes involved in higher education for the purpose of self-enrichment originates in an assumption that business objectives necessarily oppose the interests of the academic world; there cannot be a scenario in which both sides gain.

Given the current climate of dwindling public funds, declining enrollment, and a stagnant twentieth-century workforce, however, universities need to move past the black and white thinking that informs such assumptions. Just as universities can develop fruitful long-term partnerships with corporations to achieve common strategic goals, such as training students for jobs in the technology sector, so can venture and impact philanthropy be used to fund much-needed programs without dismantling an institution’s core values.

In fact, universities in other parts of the world, notably Australia and parts of Asia, have come to rely more and more on social philanthropy to help stem the rising costs of education. In order to protect both the philanthropist’s stake in the investment and the academic integrity of the programs, their model calls for effective fundraising governance. Fundraising governance calls not only for the establishment of a university foundation to manage donations and trust arrangements but also for an administration that can safeguard ethical considerations and govern transparently. Given that these are best practices for any successful university administration, managing philanthropic ventures in which private enterprise seeks to recoup their investment simply means extending consistent university governance in one more dimension.

Seen this way, venture philanthropy is a “win-win” for institutions of higher education rather than a kind of succubus intent on mining profitability at the university’s expense.

But What Exactly Is Venture Philanthropy?

John D. Rockefeller is credited with coining the term in 1969, calling it “an adventurous approach to funding unpopular social causes.” Simply put, venture philanthropy takes the approach of venture funding and applies it to the nonprofit world, helping social organizations to become economically sustainable and diversifying their capital markets.

The venture philanthropist may partner with the nonprofit institution, investing capital funds with the expectation of an eventual return on their investment. Alternately, they might lend non-financial support in the way of strategic planning or technological assistance. Typically, venture philanthropists maintain a long-term interest in the organization, providing structure and support until it is self-sustaining.

When viewed as a possible source of higher educational fundraising, venture philanthropy has a number of applications. Here are just a few of them.

Helping Students Pay for Tuition

Although he’s made few consistent statements about higher education, President-elect Trump has been rightly critical of rising tuition rates and signaled that he might force universities to spend down their endowments in order to help students pay for college – or lose their tax-exempt statuses. Another viable way to help students with tuition is venture philanthropy. Organizations like the Lumina Foundation award grant money to fill the gaps left when federal financial aid programs face closure and help to prepare public institutions for the shift to outcomes-based funding.

Boosting the Retention Rates of At-Risk Students

Wes Moore, best-selling author and former Baltimore Mayoral candidate, has raised millions of dollars for BridgeEdU, an education technology start up that will help low-income freshman transition successfully into a university environment by awarding program participants college credit and giving them counseling and extra academic support. By focusing on the most at-risk group, BridgeEdU and non-profits like it can save universities the cost of recruiting new students and help to them to attract more low-income and minority students to their campuses.

Funding Research Endeavors

According to Dr. Susan Raymond, the Executive Vice President of Changing Our World, a fundraising consulting firm, recent developments in disease research will be modified to create venture philanthropy opportunities in higher education. She points to the success of The Research Acceleration and Innovation Network established by FasterCures, created by venture capitalist Michael Milken. This organization pairs nonprofit foundations with the biotechnology sector and pharmaceutical companies in order to “fast track” disease treatment. Similar models, whereby the private sector contributes an initial investment in university research facilities with the expectation of results, are likely to be an important source of fundraising in the future.

The key to understanding the role of venture and impact philanthropy in higher education is realizing that, with or without this assistance, universities need to become more strategically focused on outcomes. This is a shift in thinking from a system traditionally focused on enrollment as a primary source of funding. And while it inevitably shifts the locus of power outward toward the private sector, it does not need to represent a diminishment of intellectual thought or rigor. Instead, it represents a new challenge, a chance for universities to revisit their mission statements and consider the kind of investment that is right for their culture.

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