Giving out money seems to make anyone appear to be an expert in almost anything-and this illusion is true of both venture capitalists and philanthropists. Venture capitalists, however, are often experienced entrepreneurs who have built their own businesses, bring specialized knowledge of an industry, or have years of experience guiding new businesses at different stages of development. Foundation executives, by contrast, may not have any training in the fields they support, or in guiding different stages of organizational development. Nor do they investigate grantees with the degree of due diligence that venture firms require before they invest. Degree of commitment.
Venture capitalists use every ounce of leverage they have to make their companies succeed.
Other deals are held out as bait, favors are called in, personal connections of investors and directors are called upon, investment banks are pressured, senior managers are recruited, courted, and promised support. For the venture-capital model to work in the nonprofit world, a foundation must put be willing to put itself on the line for its grantees. It must use its board members' influence to assist them, pressure its bankers and investment advisers to help out with contributions and loans, draw on personal connections, and support the charity through major transitions and short-term setbacks. Foundation practices can certainly stand improvement, and my purpose is not meant to endorse the status quo. But doing philanthropy well is a difficult and unique endeavor.