Venture philanthropy functions in a similar fashion to venture capital, in that philanthropists typically examine charitable causes as if they were potential business investments and seek return on investment and measurable results. Venture philanthropists are more likely to fund operating and infrastructure costs, such as computers, that old-school foundations are reluctant to pay for. Traditional funders tend to tie their donations to high-profile programs that directly impact clients, leaving it to the nonprofits to find money to keep the lights on. But operational effectiveness is as important to the venture philanthropist as an innovative program. The increase in prosperity has subsequently pushed many individuals into higher tax brackets and has caused them to seek ways to protect their money.
Many financial advisors recommend they increase their gifts to charity, including stock.
In a climate of wildly successful IPOs, this is particularly advantageous to both the donor and recipient. With a gift of stock, the nonprofit organization benefits from the value of the stock, while the donor receives a tax deduction based on the fair market value of the stock. One consideration, however, is that sometimes the stock is tied up in the form of options that cannot be exercised for a long period of time, so gifts of stock may not be appropriate for some donors until some future date. Another factor to consider is that many of the new wealthy are relatively young, and may become even more philanthropic in their later years. In the interim, their need to prevent negative tax implications may be a driving force behind the creation of more private and family foundations.