VIRTUOUS CAPITAL - WHAT FOUNDATIONS CAN LEARN FROM VENTURE CAPITALISTS

U.S. foundations and nonprofits work diligently on behalf of society's most needy and yet report that progress is slow and social problems p ersist. How can they learn to be more effective with their limited res ources? Foundations should consider expanding their mission from inves ting only in program innovation to investing in the organizational nee ds of nonprofit organizations as well. Their overemphasis on program d esign has meant deteriorating organizational capacity at many nonprofi ts. If foundations are to help nonprofits be assured of making payroll , paying the rent, or buying a much-needed computer, they must develop hands-on partnering skills. Venture capital firms offer a helpful ben chmark. In addition to putting up capital, they closely monitor the co mpanies in which they have invested, provide management support, and s tay involved long enough to see the company become strong. If foundati on officers familiarize themselves with such practices, they can begin to build organizational capacity in the nonprofit sector. Foundations can hire organizational experts to assist grantees; they can lengthen grant terms to allow nonprofits to build up organizational strengths, and they can create new classes of grants that allow for organization al effectiveness. Nonprofits in turn should articulate their organizat ional needs when applying for grants; they should apply to foundations known for longer-term grants; and they should create plans that justi fy long-term support from foundations.