Editorials ~ Sonoma Valley Sun


Venture philanthropy

Posted on August 8, 2019 by Sonoma Valley Sun

Building a big business requires venture capital, an infusion of wealth that is used to fund a business while it grows. Unlike loans, venture capital is an investment and its payoff is usually in the form of dividends or shares of stock that can be sold or traded on the open market. In this way, a business and its owners accrue wealth, power, and influence; if business losses occur, it’s the investors who suffer.

 The grand scheme of capitalism is built on the framework of venture capital, and various types of corporate structures have been invented to handle the differing desires of investors, from limited liability corporations (LLCs) which protect investors from financial liability in excess of their capital contributions, to public companies whose stock is bought and sold on open markets like NASDAQ.

 But the world of business is always looking for more ways to make money, gain power, and exert influence; the invention of subprime mortgage bonds is one example. Various other schemes are constantly being invented, and venture philanthropy is one of them.

 Venture philanthropy is the investment of capital into the nonprofit sector primarily for the purpose of gaining influence and the image of respectability. While investments in nonprofits appear based upon generosity and idealism, and often they are, sometimes these investments are purely tactical. For example, Henry Tate, the 19th century founder of the Tate Gallery in London, originally gained his wealth in the exploitative, slave-based sugar plantation trade, and his creation of the museum’s original collection of artwork “washed” his ill-gotten fortune in the waters of respectability. In America, John D. Rockefeller and Andrew Carnegie, by all accounts ruthless capitalists, similarly clothed themselves in respectable outfits through the philanthropic use of their fortunes.

 The Sonoma Valley has not been immune to the venture philanthropy of wealthy locals, many of whom have been welcomed with open arms by nonprofits seeking funding. Rewarded with board seats and public honor, some wealthy benefactors give selflessly and generously of both time and money; others primarily seek increased power and influence. Sometimes that power and influence is wielded simply by the unvoiced threat of withdrawing financial support.

 Once a nonprofit comes to depend upon a wealthy benefactor, that dependence cuts both ways. The funding having become essential to its programs and staffing, and the risk of losing it having become so great, nonprofits and their boards are reluctant to offend or even disagree with their benefactor’s wishes. In this way, discussion of matters of public import get muzzled and dissent is silenced. The orientation of programs becomes captive to financial interests and goals change in ways both subtle and obvious. This is how venture philanthropy delivers on its investment and increases the power and influence of a small minority with big money.

The nonprofit sector has become increasingly important to Sonoma Valley’s social and civic matters. As government increasingly finds itself unable to fund community-serving and social programs, it depends upon nonprofits to pick up the slack, which they have done. The danger is that this arrangement becomes too aligned with particular business interests looking to leverage public and governmental opinion through the exercise of their wealth, power, and influence. In this way, benefactors  become a wolf in sheep’s clothing, and with self-interest bends philanthropy and public policy to their will.

— The Sun Editorial Board

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