Those who expect to see measurable outcomes from their investment will demonstrate different behavior than those who give without expectations for change. Specifically, as one moves away from social return on investment towards financial return on investment, expectations become more objective and measurable, which leads to more involved, rigorous investor behavior. It is our intent to shed light on the middle area of the continuum, where for-profit expectations are currently being applied to philanthropic endeavors to maximize investment output. Foundations' investment behavior is often passive, and too little attention is paid to the question of organizational capacity for the grantee. Consequently, traditional philanthropy does not invest sufficiently in the ability of a grantee to grow and become more productive.
Venture capitalists anchor the right side of the expectations continuum.
VC firms expect results, which at minimum means a return of their investment and, at best, some kind of profit. Venture capitalists communicate to their investees that there are very real expectations and consequences for failure, and they establish metrics with investees to indicate whether the desired outcomes are being achieved. They encourage investment in capacity building, knowing that without capacity their investment will be at risk. Accordingly, venture capitalists provide expertise, long-term investment commitments and outcome measures to ensure a return on investment. In a word, they expect something measurable to come from their investment, and they are committed to seeing that happen.