If Pigs Had Wings

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There has been a recent buzz in the foundation world about the venture capital model, stimulated by publication in the Harvard Business Review of an article, "Virtuous Capital: What Foundations Can Learn from Venture Capitalists" by Christine Letts, William Ryan, and Allen Grossman. The article has been passed around offices and boardrooms, has stimulated much discussion, and has even led some to redirect funding. It has accomplished what few academic articles are able to do — prodded the field into thinking critically about the way it does its work.

The basic argument is straightforward: 1) Foundation grants are failing to achieve their goals. 2) The adoption of strategies used by venture capitalists (partnering with funded organizations, managing risk, adopting clear performance measures, using longer time horizons, placing large investments in and allocating more staff time to specific organizations, and linking staff compensation to performance) would significantly improve the results of foundation investments. 3) Foundations should therefore redirect their attention away from their traditional preoccupation with research and development activities (which have produced many innovative ideas but failed to reap the benefits of those ideas) toward strengthening organizational capacity.