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Why Venture Philanthropy can Thrive in a Decentralized Economy – By Che Kohler

Guest Post

As a digital marketer with a focus on SEO, my job for the last 5 years has been solely focused on trends and how to develop strategies that websites can use to leverage these trends and earn more traffic via search engines.

Mapping out trend data, collecting keyword research and online mentions like hashtag data would eventually lead me to two very strange keywords I’d never seen before, blockchain and cryptocurrency. These two keywords were gaining popularity in 2016 and by 2017 their popularity skyrocketed to new heights.

I decided to dive into the topic and started researching for hours on end. Data was hard to come by and I would sift through forums, Medium and Quora posts and links to obscure blogs around these topics.

What I came into contact with was highly technical and not really suitable for general public consumption. This wasn’t very practical knowledge or rather, let me say applicable knowledge, so I decided to start blogging about my findings in terms that I could understand so I had something to fall back on.

A Stark Realisation

In my time as a cryptocurrency enthusiast, I’ve come to realise this community has some of the most gracious people you could ever find. We are all so excited about this technology and put our money where our mouths are. I’ve personally given away some cryptocurrency to reward someone for quality content, or to fund a project and received my fair share of donations in return.

This comradery got me thinking about whether this ideology can be applied on a larger scale. When looking at all the cryptocurrency projects available, the majority, if not all, are geared towards the established decentralised systems with the aim of disrupting a specific sector of trade and commerce by applying blockchain technology. While this will benefit many people, the majority of the world will not see a penny from it. At this rate, blockchain will suffer from the same centralisation issues and concentration of wealth that the current system has, bar a few exceptions.

This train of thought continued to bug me until I started watching a recent episode of Billions, specifically episode 4 of season 3, where Bobby meets with a charity he sponsors. He chats openly with a fellow contributor who suggests the charity pivot into a venture philanthropy organisation, and that’s when the idea hit me.

What is Venture Philanthropy?

Venture philanthropy and social investment are about bridging the gap between corporate and non-profit organisations. It requires the matching of philanthropy with the spirit of investment, resulting in a high-engagement and long-term approach aiming to create social impact.

So what that means is that they fund specific projects that will have a social impact, create jobs and improve the standard of living for underprivileged communities but at the same time ensuring that there is a return on investment.

While it may seem like two ideologies that will clash and you’re right in thinking that, there is an equilibrium where it can exist and flourish. This elusive equilibrium has eluded many projects and is why venture philanthropy has somewhat of a bad wrap. I do think that with the concept of blockchain being added to the conversation, we could see this sweet spot between profit and poverty alleviation come to fruition.

The Problem with Venture Philanthropy

While I’m all for creating sustainable development, there are plenty of pitfalls that derail what venture philanthropy can achieve. Bridging the gap and putting venture capitalists in the same room with non-profits is always going to cause friction and finding a balance between the schools of thought and reaching a consensus on what is the best way forward is a slow and arduous process.

Venture philanthropy tends to be a power struggle and in many cases, one will dominate the other, with the project either leaning more towards philanthropy or in some cases leaning more towards generating profitability. In both cases, these biases skew the decision-making process and often lead to negative outcomes for the project.

Measuring the Impact of VP

Another issue plaguing this sector is agreeing on what defines success. Is it numbers in the bank, jobs created, people served, lives changed or influenced? How do we combine both the quantitative and the qualitative to match? You can’t simply “measure results” at non-profits the way you could at companies—”reducing illiteracy,” for example, is a harder objective to track than “selling subscriptions”.

To me, this is more an argument based on ideologies and not fact. Businesses are used to looking at raw numbers while NPO’s are used to listening to stories and qualitative data. These are two different forms of data collection, but it doesn’t mean that they cannot be captured, collated and analysed in order to establish trends and measure impact.

How Cryptocurrency & Blockchain can be Applied to Venture Philanthropy

So now that you know what venture philanthropy is and what its shortcomings are, you’re probably asking why the hell was he going on about cryptocurrency earlier. There is a method to my madness and I will now try to explain how these two seemingly unrelatable topics can go hand in hand.

Ease of Raising Funds

If you’ve tried to raise funds for an NPO before you’ll know that it’s not easy looking for individuals, institutions, businesses or foundations and once you’ve found them, pitching them to fund you for the next year or so. Like any sort of investment, this is a relationship building based process that takes time and effort and can often be the first hurdle that stops the project from getting off the ground.

This is where cryptocurrency can really flex its muscles – we all know how easy it has been for ICO’s to hit their soft cap in the current market.

Creating Stakeholders & Consensus

One of the main issues I have with VP and business, in general, is the concept of stakeholders. In most cases, decision making is a top-down approach, which isn’t an empowering approach to social development as these hierarchal structures keep those on the ground submissive and perpetuate the status quo of poverty.

In a decentralised environment, everyone has a stake in the project – the investors, the managerial staff and the actual staff are all given a stake in the project.

A Decentralised Economy

Taking money from one of a few investors normally comes with strings attached. These investors have representation on the board and often have a big say in crucial decision-making processes which can quickly lead to the project going off the rails.

Having more stakeholders means that no single member has overbearing power over another and all have equal say and stake in decision making.

Taking Responsibility for Outcomes

As I’ve mentioned earlier, it’s hard to gauge on what outcomes should be measured, what deliverables drive the project forward and who is to take responsibility for it all. By employing a smart contract, all stakeholders assign metrics towards themselves, and this is verified via a majority consensus of all stakeholders involved.

Deliverables are set out via smart contracts and attached to each stakeholder on the blockchain. If a certain stakeholder fails to meet their required metrics, they could have their stake reduced or removed from the project entirely.

Sustainable Social Upliftment

This point is a bit of an idealistic one, but I feel it’s worth mentioning. If we considering the relative ease at which an ICO can gather funding we can easily scope out projects that fit what we’ve raised and then set this to decide on a burn rate and time to profitability.

Charity Begins at home

It may be an old cliche saying, but it still rings true, yet many have since forgotten about it. Social upliftment projects have become restricted to being done by governments, NPO’s and corporates, while the individual seems to feel that there are no reputable projects or think paying taxes is all they need to do to contribute to society. This is a mindset I feel this system can change.

Measuring the Impact

Since aspects of the project can be assigned to the blockchain, we can easily gather and collate data.  The usual financials such as sales, income, profit, salaries, training costs etc. can all be captured and reviewed.

Nothing Ventured Nothing Gained

The possibilities that blockchain affords us are almost limitless in its application, and it’s up to us to explore every facet of it. Instead of wanting to be the next Uber but with blockchain or the next SAP of blockchain, lets look at real-world applications that affect more than just a handful of people.

 

Source: nichemarket – https://www.nichemarket.co.za/blog/venture-philanthropy-can-thrive-decentralised-economy/

About the author:

I’m a Cape Town based digital marketer by trade with a keen eye on blockchain and cryptocurrency as a private investor as well as being a technology enthusiast.

LinkedInhttps://www.linkedin.com/in/ch%C3%A9-k%C3%B6hler-9b4129a0/?originalSubdomain=za

Disclaimer: This article should not be taken as, and is not intended to provide any investment advice and is for educational purposes only. As of the time posting the writers may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency as all investments contain risk.

 

About the author

I’m a Cape Town based digital marketer by trade with a keen eye on blockchain and cryptocurrency as a private investor as well as being a technology enthusiast.

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