Cautions for a Marriage of Venture Philanthropy Applied to Politics

Business Week’s Jessi Hempel points to a relatively new for-profit, National Progressive Coalition, that is applying the principles of venture philanthropy to the realm of politics by connecting wealthy donors with progressive organizations. According to Hempel:

NPC bases its business model on the idea that the progressive movement has historically supported candidates, not organizations—donations rise and fall with political races, while between elections, ideas and issues lag. The right, on the other hand, benefits from a robust network of think tanks such as the Heritage Foundation and the Cato Institute that keep ideas alive even when there's no election in the offing. NPC hopes to use the Web to build a similar kind of infrastructure by connecting left-leaning organizations—many of which are newly formed grassroots groups with inexperienced leadership—with investors who are keen to provide ongoing time and money.

This kind of visionary thinking and investment is needed if we are ever going to move to an era in which nonprofits receive funds not because of who they know but because of what they do. I’m also very familiar with both the impact and funding challenges faced by the best progressive organizations and believe a resource development effort focused in this direction is very strategic.

But based on the article, and my past experience building an Internet and metrics-based donor marketplace, I’ve got two cautionary concerns:

1.) I’m no MBA but I don’t think NPC’s business model is, as described, an “idea” that seeks to shift some portion of support from political candidates to political organizations (see quote above.) The business model is described further in the article by the fact that nonprofits which join NPC’s marketplace are charged up to $5,000 while potential donors are charged $250. With 200 organizations currently signed on, the revenue fueling this innovation appears to come not only from major investors like August Capital general partner Andy and Deborah Rappaport who have invested $1.5 million. It also is coming from progressive organizations whose limited resources already compromise their ability to have impact. Hopefully, these organizations are made well aware of the risk that accompanies Internet start-ups like this one. I also hope NPC is providing robust metrics that demonstrate how much new money and how many new donors are being attracted for what percentage of marketplace members (also recognizing that, if and when the "Internet Effect" kicks in, these numbers will grow substantially.)

2.) My second concern comes from the potential for conflict of interest suggested by NPC’s expanding product line which includes “…a proprietary ‘political return on investment’ tool.” This set of metrics, ostensibly designed to inform donor investments, will “…include 54 measurements that cover everything from the average years of experience among the senior leaders to the percentage increase in the budget or revenue from the previous year.”
In essence, this is an audit function applied to the same nonprofits which are paying NPC to connect them with high-net worth donors. Since the company already has major investors lined up, and is heading to Sand Road for more, I’ll assume I’m the only one who wonders if NPC could afford to provide a negative rating to nonprofits which pay them $5,000 membership fees.

Maybe more information will establish the validity of this model which is poised to serve a very important role. As always, PhilanthroMedia welcomes your input…

Cautions for a Marriage of Venture Philanthropy Applied to Politics

Susan Herr